(Reuters) -S&P Global Ratings revised the credit outlook for Australia's Woodside to "negative" from "stable" on Thursday after the energy company reached a final investment decision of $17.5 billion on its Louisiana liquefied natural gas project.

Woodside deciding to proceed with the project without a material sell-down of its offtake exposure has eroded ratings headroom, the rating agency said.

However, the agency affirmed its 'BBB+' long-term issuer credit rating and 'BBB+' long-term issue ratings on Woodside and its senior unsecured notes.

Earlier this week, the Australian oil and gas company approved a multi-billion dollar LNG project in Louisiana, confident of a pro-fossil fuel U.S. administration and strong demand.

This followed a 40% stake sell-down in the U.S. project to U.S. infrastructure investor Stonepeak, which left Woodside with a majority stake.

S&P said Woodside is exposed to the market risk of the whole project compared with its current effective economic interest in the project of 60%.

Woodside Chief Executive Officer Meg O’Neill reiterated this week that the company is pursuing a further stake dilution in the LNG project.

S&P expects Woodside's ratio of funds from operations to debt to track at about 50% over the next few years.

Future ramp-ups at the Louisiana project are likely to reduce cash flow, leaving the energy giant with very limited capacity to accommodate weaker oil prices or cost overruns at any of its major projects, the ratings agency said.

(Reporting by Sneha Kumar in Bengaluru; Editing by Muralikumar Anantharaman and Mrigank Dhaniwala)