Woodside terminates Leviathan deal
05/21/2014 09:34
Leviathan holds 453 billion cu.m. of gas [file] Photo: Courtesy of Albatross
Australian hydrocarbon firm Woodside Energy has officially withdrawn
from a $2.71 billion deal to acquire a 25 percent share of the Leviathan
natural gas reservoir, the company announced overnight on Tuesday. The termination of the agreement follows months of uncertainty regarding the expected partnership, due to disputes between the Australian firm and the Israeli Tax Authority. After signing a memorandum of understanding with the Leviathan partners on February 7, Woodside was expected to sign an official agreement for the acquisition on March 27. Yet by that day's end, the agreement did not pan out due to the disagreements between Woodside and the Tax Authority.
In the official announcement overnight on Tuesday, Woodside said that negotiations among the parties failed to reach a commercially acceptable outcome, which would have enabled the full-term agreements to be implemented.
Woodside CEO Peter Coleman stressed that the decision to pull out of the deal was difficult and not taken lightly.
“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,” Coleman said. "While Woodside’s commitment to growth is strong, even stronger is our commitment to making disciplined investment decisions.”
With sufficient hydrocarbon supplies for decades of domestic use and export, Leviathan – located about 130 km. west of Haifa – is estimated to contain about 535 billion cu.m. (18.9 trillion cu.ft.) of natural gas and 34.1 million barrels of liquid condensate.
Houston-based Noble Energy holds 39.66% of the Leviathan field, Delek Group subsidiaries Delek Drilling and Avner Oil Exploration each hold 22.67%, and Ratio Oil Exploration owns 15%. The reservoir is expected to be in operation sometime in 2017.
"I would like to acknowledge and thank the Leviathan Joint Venture participants and the Israeli Government for working with us," Coleman said.
Following the termination, Noble Energy Chairman and CEO Charles Davidson stressed that development of the field would go on, despite the loss of the agreement.
"The plans for development of the Leviathan discovery have significantly changed since we began the search for a partner approximately two years ago," Davidson said. "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 [liquefied natural gas] into a later phase of development versus our earlier plans."
Although an export policy was approved by the government on June 23, 2013, capping exports at 40%, the question has long remained to whom the Leviathan partners will export the gas.
In January 2017, the Leviathan partners signed a $1.2b. sale agreement with the Palestine Power Generation Company, through which the firm would buy around 4.75 billion cu.m. of gas for a period of 20 years – to fuel a future 200-megawatt power plant in Jenin.
Most recently, the partners of the neighboring, grid-connected Tamar reservoir – of which Noble Energy and Delek are also the major stakeholders – signed a letter of intent two weeks ago with Spanish firm Union Fenosa Gas to supply gas to the company's existing gas liquefaction facilities in Egypt. If that letter of intent progresses into a real agreement, the parties would partake in a 15-year contract with a total gross sale quantity of up to 71 billion cu.m. of gas.
In February, the Tamar partners also signed a $500m. deal with the Jordanian firms Arab Potash and Jordan Bromine to provide 1.8 billion cu.m. of gas to the companies over 15 years, beginning in 2016.
For exports outside of the immediate neighborhood, experts have debated whether a pipeline to Turkey, an LNG plant onshore in Israel, a shared LNG plant onshore in Cyprus, a floating LNG plant, use of the Egyptian LNG facilities or some combination of these options would make the most sense. Through the Turkish pipeline, the gas could reach European buyers, while through an LNG plant, the hope would be to reach the Asian market.
As far as Leviathan in particularly is concerned, Noble Energy said on Tuesday overnight that the initial development phase for the reservoir will involve building a 0.045 billion.-cu.m.-per-day floating, production, storage and offloading (FPSO) system, to provide natural gas to Israel and surrounding regional markets. Front-end engineering and design studies would continue, however, for the second phase of development, which will likely involve a floating liquefied natural gas (F-LNG) production system, Noble Energy said.
When Woodside was expected to be involved in the reservoir's development, the company had prioritized the idea of F-LNG export for Leviathan, stressing that this would be the preferred method of export. As part of the terminated deal, Woodside would have operated any liquefied natural gas development for the reservoir.
The Leviathan partners, however, remained undeterred following the deal's failure.
"While we have not been able to reach a mutually acceptable agreement with Woodside, we continue to move forward with our partners and the Israeli government with plans to develop this world-class asset for the benefit of all stakeholders," Davidson said.
Link to source: http://www.jpost.com/Business/Business-News/Woodside-terminates-Leviathan-deal-352893
