Woodside Browse project faces financing risks as banks curb gas lending

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Woodside Browse financing risks

Highlights

At least 13 of 42 banks that funded Browse proponents over five years are now ruled out as project financiers due to tighter fossil-fuel policies.
Major Australian banks—ANZ, Commonwealth Bank, and NAB—have announced new restrictions on lending to greenfield oil and gas projects, increasing funding pressure on Woodside Browse.
Global LNG prices have risen due to the U.S.-Israeli war with Iran, and Japanese investors plus Abu Dhabi National Oil Company provide alternative funding strength for the Browse project.

Funding pressure builds around Browse plan

As reported by ABC News, Woodside is seeking to pipe gas from the Browse Basin to the North West Shelf processing operation on the Burrup Peninsula, in what would rank among Australia's largest and most expensive resources developments. The project has regained momentum after the federal government last year approved a 50-year extension for the North West Shelf, while Woodside's partners include BP, Mitsui and Mitsubishi.

Concerns over financing are intensifying as major lenders tighten restrictions on fossil-fuel exposure. ANZ says it will not directly finance new or expanded upstream gas projects, while Commonwealth Bank says it will provide no project finance to new or expanded oil and gas extraction, and NAB says it will not directly lend to assets dedicated solely to greenfield oil and gas extraction projects.

Elisa Leys, acting Tokyo office director at Solutions for Climate, says the financing pool is shrinking as project costs rise. She says a review by her group of 42 banks that funded Browse proponents over the past five years found 13 would be unable to provide project finance to the development, while three would also face difficulty lending to Woodside itself.

Global backers and market conditions support the case

Saul Kavonic, an oil and gas analyst at MST Financial, says the role of Australian banks may be less critical because the companies involved can access deeper offshore debt markets. He says Japanese funding sources remain open to projects backed by domestic investors, and argues Abu Dhabi National Oil Company, after buying Shell's 16.7% stake in the North West Shelf through its Australian arm, brings balance-sheet strength that is "bigger than a bank".

Woodside says Browse is still in its concept definition phase and no financing decision has been made. The company says it does not yet have a preferred funding model and that any investment must remain disciplined and attractive to shareholders, while the project still requires state and federal regulatory approvals.

Kavonic says the U.S.-Israeli war with Iran has tightened global LNG supply and lifted prices in Europe and Asia, improving Browse's commercial outlook. Critics remain sceptical, arguing the project's remote location, complex ownership structure and carbon dioxide content of about 12% could raise borrowing costs further and undermine its economics.

Earlier, we outlined how S&P flagged rising sovereign borrowing risks amid geopolitical shocks and elevated fiscal spending.

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