Woodside Petroleum joins Israel’s LNG export push
Australian oil and gas company Woodside Petroleum said Monday that it will buy a 30% stake in the Leviathan gas field, offshore Israel, advancing plans to export the burgeoning reserve base in the East Mediterranean as LNG.
Under the agreement, the Perth-based company will give the Leviathan partners an upfront payment of $696m for a 30% stake in the Amit and Rachel licence areas with estimated recoverable reserves of 17 trillion cubic feet (tcf). This will be followed by a $200m payment once regulations enabling the export of LNG from Israel are in place, and a further $350m once a final investment decision on an LNG export development is taken.
US-based explorer Noble Energy will remain the upstream operator of the Leviathan joint venture, although its stake will be diluted from 39.66% to 30%, while the remaining equity will be diluted equally across the other Israeli partners including Delek Drilling (15%), Avner Oil Exploration (15%) and Ratio Oil Exploration (10%).
The Leviathan consortium launched a formal process in September to find an international partner with LNG project development experience to help advance an LNG export project that would be supplied from the field, expected to start initial production in 2016.
Woodside breaks out of Australia
Woodside said in a statement that it would operate any LNG project from the field. And the deal, which is still subject to a number of conditions, advances its new strategy, laid out by CEO Peter Coleman earlier this year, to leverage its experience in developing and operating the North West Shelf and Pluto LNG projects to break out of its core Australian business.
"We have a proven track record of safe and reliable operations in Australia and being selected as the Leviathan joint venture's preferred partner in a competitive bidding process demonstrates the value of our LNG development capabilities," he said in a statement.
"Acquiring an interest in these permits is an exciting opportunity to grow our portfolio in the emerging eastern Mediterranean basin, and we look forward to finalising the agreement."
The change in strategy was in evidence earlier this year when the Perth-based company took its first foray into the east Mediterranean, joining Leviathan partner Delek to bid for acreage in the second Cypriot licensing round, where a string of discoveries has cemented the region's potential as a future LNG export hub.
The Woodside deal was seen a blow to the ambitions of Russia's Gazprom, which was also understood to have bid for the stake, although the company's London-based marketing arm holds a preliminary agreement with the Noble-led Tamar consortium to lift 2.5mtpa from a planned 3mtpa floating liquefaction project, which will be fed by the nearby offshore Tamar and Dalit fields.
However, an industry source familiar with the Leviathan project said that Noble had been concerned that Gazprom might have attempted to shift the LNG marketing strategy away from Europe in an effort to protect its existing pipeline sales to the continent.
The Leviathan partners have yet to be given the formal green light from the Israeli government to export from the field, although a committee headed by Israel's Energy and Water Ministry director, general Shaul Tsemach, has recommended allowing exports only after long-term domestic needs are satisfied.
The consortium have launched a pre-front-end engineering and design (FEED) study on a prospective LNG export project, and are still studying number of potential development options. These include an LNG export plant on Israel's Mediterranean coast near to Ashkelon or at the Red Sea port of Eilat, which would be closer to Asian markets, and would have the advantage of being able to access these markets without passing through the Suez Canal.
Other potential options include developing a joint LNG export plant at the Cypriot port of Vassilikos, which could be fed by Leviathan, as well as the Aphrodite field (offshore Cyprus), although the Tsemach committee has indicated that it would prefer any LNG export facility to be located in Israel.
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