Woodside's Leviathan deal at risk
- March 07, 2014
Woodside Petroleum's $US2.6 billion ($2.85bn) entry into the giant
Leviathan offshore gasfield could be at risk, with the Israeli Ministry
of Finance reportedly unwilling to recommend the Perth company's desired
taxation regime for LNG exports.
Israel's Globes newspaper says a gas export tax committee is set to provide Prime Minister Benjamin Netanyahu with recommendations that a planned Woodside-operated LNG plant be taxed at a higher rate than Woodside wants.
As reported in The Australian this week, Woodside's entry terms into Leviathan are conditional on tax issues around transfer pricing being sorted out by March 27.
If the conditional deal, signed last month with the Noble Energy-led Leviathan joint venture, is not made binding by that date, it is no longer exclusive and terms can change.
Woodside chief Peter Coleman has said the tax issues may not be sorted by the deadline date and that Woodside's willingness to sign the deal may depend on signals from the government.
The Globes report said the recommendations could still be overruled by Mr Netanyahu in Woodside's favour.
Last month, Woodside agreed to pay $US2.6bn in stages to take a 25 per cent stake in Leviathan and operate a planned floating LNG plant. This deal superseded one signed in December 2012, where Woodside was to pay up to $US2.3bn for a 30 per cent stake.
The revised deal offers more cash for a smaller stake because more pipeline exports are expected from Leviathan, at the expense of LNG exports. This would make it cheaper to develop and therefore a more valuable field.
Woodside declined to comment on the Globes report yesterday. Speaking to The Australian after Woodside's full-year results last month, Mr Coleman said Woodside had been advising Israel, which had not yet exported any gas, to adopt a similar transfer pricing regime to that in Australia.
Globes, which did not reveal its sources, said Woodside had approached Israel's finance minister, Yair Lapid, to say the government's proposed yield rate for FLNG operators was lower than standard practice.
But this does not look to have swayed the ministry.
"The Ministry of Finance is convinced that gas exporters, because they belong to the midstream part of the industry, have far lower risk than the gas exploration companies, because in the export stage there is already considerable certainty," Globes said.
The big field holds 19 trillion cubic feet of gas, about half of which is planned for export.
This is about half the reserves of the massive Gorgon project off Western Australia.
The deal is key for Woodside and has the potential to lift its contingent gas reserves by 50 per cent. It is also vital for Israel, which will boost export revenue if it can support the Leviathan venture's goal of a floating LNG plant.
A sweetener for Israel is an aggressive production timetable Mr Coleman flagged last month.
He said the joint venture could be in a position to make a final investment decision on a floating LNG development by the end of next year.
Israel's Globes newspaper says a gas export tax committee is set to provide Prime Minister Benjamin Netanyahu with recommendations that a planned Woodside-operated LNG plant be taxed at a higher rate than Woodside wants.
As reported in The Australian this week, Woodside's entry terms into Leviathan are conditional on tax issues around transfer pricing being sorted out by March 27.
If the conditional deal, signed last month with the Noble Energy-led Leviathan joint venture, is not made binding by that date, it is no longer exclusive and terms can change.
Woodside chief Peter Coleman has said the tax issues may not be sorted by the deadline date and that Woodside's willingness to sign the deal may depend on signals from the government.
The Globes report said the recommendations could still be overruled by Mr Netanyahu in Woodside's favour.
Last month, Woodside agreed to pay $US2.6bn in stages to take a 25 per cent stake in Leviathan and operate a planned floating LNG plant. This deal superseded one signed in December 2012, where Woodside was to pay up to $US2.3bn for a 30 per cent stake.
The revised deal offers more cash for a smaller stake because more pipeline exports are expected from Leviathan, at the expense of LNG exports. This would make it cheaper to develop and therefore a more valuable field.
Woodside declined to comment on the Globes report yesterday. Speaking to The Australian after Woodside's full-year results last month, Mr Coleman said Woodside had been advising Israel, which had not yet exported any gas, to adopt a similar transfer pricing regime to that in Australia.
Globes, which did not reveal its sources, said Woodside had approached Israel's finance minister, Yair Lapid, to say the government's proposed yield rate for FLNG operators was lower than standard practice.
But this does not look to have swayed the ministry.
"The Ministry of Finance is convinced that gas exporters, because they belong to the midstream part of the industry, have far lower risk than the gas exploration companies, because in the export stage there is already considerable certainty," Globes said.
The big field holds 19 trillion cubic feet of gas, about half of which is planned for export.
This is about half the reserves of the massive Gorgon project off Western Australia.
The deal is key for Woodside and has the potential to lift its contingent gas reserves by 50 per cent. It is also vital for Israel, which will boost export revenue if it can support the Leviathan venture's goal of a floating LNG plant.
A sweetener for Israel is an aggressive production timetable Mr Coleman flagged last month.
He said the joint venture could be in a position to make a final investment decision on a floating LNG development by the end of next year.
Link to source: http://www.theaustralian.com.au/business/latest/woodsides-leviathan-deal-at-risk/story-e6frg90f-1226847559642
