Australia's Woodside Pulls Out Of Leviathan Gas Deal
MELBOURNE/JERUSALEM, May 21 (Reuters) - Australia's Woodside Petroleum pulled out of an agreement to take a stake worth up to $2.7 billion in Israel's flagship Leviathan gas project on Wednesday, as the group developing the field shifted focus to regional markets.
The deal's collapse more than a year after negotiations began will not affect development, the Leviathan partners said, and first production is still expected in late 2017.
Leviathan was discovered in 2010 in the eastern Mediterranean and was world's the largest offshore gas find of the decade. It holds an estimated 540 billion cubic meters of gas, most of which is earmarked to be sold abroad.
The U.S.-Israeli group developing the field first tapped Woodside, an expert in liquefied natural gas (LNG), in December 2012 to gain access to distant Asian markets.
Agreement on most issues was reached in the drawn-out negotiations, officials said, but talks hit a surprise snag in March when Woodside executives did not show up at the formal signing ceremony in Israel.
The delay was over a tax dispute. Talks between Woodside and Israeli authorities ensued, though analysts said relations soured with the Leviathan partners, which in the meantime pursued export agreements in neighbouring countries.
"All parties have worked very hard to secure an outcome which would be commercially acceptable, but after many months of negotiations it is time to acknowledge we will not get there under the current proposal," said Woodside CEO Peter Coleman.
Leviathan's operator, Texas-based Noble Energy, said development would stay on schedule but noted a change in plans since the search for a new partner began about two years ago.
"Perhaps the most dramatic changes have been associated with the growth in the regional markets. The emergence of these regional markets, which are accessible through pipeline outlet, has pushed the need for LNG into a later phase of development versus our earlier plans," said CEO Charles Davidson.
Woodside left the door open to renegotiation with the project stakeholders - Noble and Israel's Delek Drilling , Avner Oil and Ratio Oil - if there were "material changes" to the investment conditions.
Impact
The decision to pass on a 25 percent stake in Leviathan, located in a region fraught with geopolitical risk and a country that has never developed such a large gas field, was welcomed by investors and Woodside's shares were up as much as 1.4 percent.
"You would have wanted a very high hurdle rate for investment in Israel given the uncertainties that surround it," said Credit Suisse analyst Mark Samter.
In Israel, analysts said Woodside's departure was not a surprise and its effect would not be dramatic.
"The main impact on company stocks will be seen with progress in signing export deals, funding agreements and progress in the field's development," said Noam Pinko, an analyst at Psagot brokerage. "The question is, at what price will a new partner enter?"
The Leviathan partners have shown in recent months a strong preference for exporting via pipeline to neighbouring markets over liquefying the gas themselves, at least as a first phase.
In January they signed a deal to sell gas to the Palestinians. They have since put in a bid to supply gas to Cyprus, and Turkish fuel retailer Turcas said it had begun non-binding talks to procure gas from Leviathan. Selling to companies in Egypt has also been explored, experts said.
Earlier this month Delek Drilling and Avner raised $2 billion in an international bond offering to fund Leviathan's development, and the companies said at the time the demand of $13.5 billion was the largest ever for an Israeli enterprise.
(Editing by Richard Pullin and Mark Potter)
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds
- Falcon Oil Declares Commercial Flow Test Results for Shenandoah Well
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- Macquarie Strategists Expect Brent Oil Price to Grind Higher
- UK Oil Regulator Publishes New Emissions Reduction Plan
- PetroChina Posts Higher Annual Profit on Higher Production
- McDermott Settles Reficar Dispute
- US, SKorea Launch Task Force to Stop Illicit Refined Oil Flows into NKorea
- Pennsylvania County Joins List of Local Govts Suing Big Oil over Climate
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- USA Commercial Crude Oil Inventories Increase
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Equinor Makes Discovery in North Sea
- Standard Chartered Reiterates $94 Brent Call
- India Halts Russia Oil Supplies From Sanctioned Tanker Giant
- DOI Announces Proposal for Second GOM Offshore Wind Auction
- Centcom, Dryad Outline Recent Moves Around Red Sea Region
- PetroChina Set to Receive Venezuelan Oil
- Czech Conglomerate to Buy Major Stake in Gasnet for $917MM
- US DOE Offers $44MM in Funding to Boost Clean Power Distribution
- Oil Settles Lower as Stronger Dollar Offsets Tighter Market
- Chinese Mega Company Makes Major Oilfield Discovery
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Another Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Vessel Sinks in Red Sea After Missile Strike
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension
- Equinor Makes Discovery in North Sea