Without Woodside, the Leviathan partners have a weaker hand with Turkey and Egypt | Globes

Leviathan partners plump for pipeline option

21/05/2014, 17:57

Amiram Barkat

Without Woodside, the Leviathan partners have a weaker hand with Turkey and Egypt.

Analysts and Tel Aviv Stock Exchange (TASE) investors were indifferent to the announcement by Australia's Woodside Petroleum Ltd. (ASX: WPL) that it had pulled out of the Leviathan deal. The share prices of Leviathan partners Delek Group Ltd. (TASE: DLEKG) and its energy units Avner Oil and Gas LP (TASE: AVNR.L), and Ratio Oil Exploration (1992) LP (TASE:RATI.L) all fell in response to the cancellation of the farm-out deal. It can be assumed that had this announcement come a year ago, the impact on the shares would have been devastating.

Cancellation of the Woodside deal finds Delek with pretty good alternatives for the sale of natural gas and with enough capital to finance its share of Leviathan's development, due to the successful bond issue early this month and the sale of non-gas assets. The condition of Ratio, which owns 15% of Leviathan, is far less certain.

"We're continuing as usual," said Noble Energy chairman and CEO Charles Davidson, but the repercussions of the cancellation could be severe and painful, even if Leviathan's development goes ahead as planned in the short term. The gas field's marketing risks have shot up. The chances of closing a long-term gas supply contract in Asia at high prices have plummeted without the abilities and customers that Woodside would have brought to a deal.


Without the Woodside option, the Leviathan partners have a weaker hand in negotiations with customers and governments in Turkey and Egypt. It is enough for one more channel to fall apart to undermine confidence in Leviathan's development model. For the Israeli market, this is not just a blow to its image caused by the walkout of a foreign investor, but it is also the loss of the only company that could replace Noble Energy. It seems that Israel's total dependence on Noble Energy will only deepen.

The cancellation was no surprise given discord over the deal lately, topped by Woodside CEO Peter Coleman's theatrical walkout from the signing ceremony at the Sherover Promenade in Jerusalem.

A brief reminder: Delek controlling shareholder Yitzhak Tshuva and his partners brought Woodside to Israel in the belief that they lacked the capabilities to develop Leviathan on their own. They sought an energy major to inject capital and expertise and to bring Far Eastern customers who were prepared to pay top dollar for Israeli gas. Two years ago, everyone was talking about the need to build a huge liquefied natural gas (LNG) plant. The Tzemach Committee on gas exports recommendations were tailored to the size of this plant, which is now irrelevant.

In retrospect, it seems that the seeds of separation were sowed when the memorandum of understanding was signed in December 2012. Tshuva and his Israeli partners at Ratio were not pleased by the deal that Woodside offered, and it seems that the deal was forced on them by their American partner. This dissatisfaction was translated into the creation of an alternative market for Leviathan's gas.

Contacts with large customers in Turkey, Egypt, and Jordan were originally intended to assist in the effort to secure from Woodside a better deal. But this effort, handled by Delek Drilling CEO Yossi Abu, was so successful that Tshuva fell in love with the new option and set aside the dream of selling LNG to China and Japan. The turnaround was completed when Noble Energy also came on board and announced that the sale of gas via pipeline to regional markets was its preferred option.

Personal relations also contributed the failure of the deal. Delek executives' refusal to meet Woodside representatives for six months deeply insulted the Australians. Tshuva felt their response in his exchange with Coleman on the balcony of the King David Hotel in Jerusalem. Coleman told Tshuva to stay out of his business, and left the partners in Leviathan in the lurch.

Published by Globes [online], Israel business news - www.globes-online.com - on May 21, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014



Link to source: http://www.globes.co.il/en/article-leviathan-partners-plump-for-pipeline-option-1000940423

Noble Energy Announces Termination of Leviathan MoU With Woodside | Noble Energy

May 20, 2014

Noble Energy Announces Termination of Leviathan MoU With Woodside

HOUSTON, May 20, 2014 /PRNewswire/ -- Noble Energy, Inc. (NYSE: NBL) today announced that the parties have agreed to terminate the non-binding memorandum of understanding regarding the sale of interest in the Leviathan licenses, offshore Israel, to Woodside Petroleum.  Following termination of the agreement, working interests in the Leviathan Project remain as follows: Noble Energy as operator (39.66 percent), Delek Drilling (22.67 percent), Avner Oil Exploration (22.67 percent), and Ratio Oil Exploration (15 percent).

Charles D. Davidson, Noble Energy's Chairman and CEO, commented, "The plans for development of the Leviathan discovery have significantly changed since we began the search for a partner approximately 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.  While we have not been able to reach a mutually acceptable agreement with Woodside, we continue to move forward with our partners and the Israel government with plans to develop this world-class asset for the benefit of all stakeholders."

Significant progress has been made on the development of the Leviathan field, following approval of Israel's natural gas export policy, an agreement with Israel's Anti-trust Authority, and receipt of the Development and Production Leases for Leviathan.  Noble Energy is targeting to sanction the initial phase of development at Leviathan by the end of 2014, with first production from the field currently planned for late 2017.

The initial development phase is planned to be a 1.6 billion cubic feet per day floating, production, storage and offloading (FPSO) system, to provide natural gas into Israel and surrounding regional markets.  Front-end engineering and design studies are ongoing for the second phase of development at Leviathan, which is anticipated to be a floating, liquefied natural gas (FLNG) production system.

The Leviathan Project is located offshore Israel in approximately 5,550 feet of water.  It has an estimated 19 trillion cubic feet of discovered natural gas resources.

Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production.  The Company has core operations onshore in the U.S., primarily in the DJ Basin and Marcellus Shale, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa.  Noble Energy is listed on the New York Stock Exchange and is traded under the ticker symbol NBL.  Further information is available at www.nobleenergyinc.com.

This news release contains certain "forward-looking statements" within the meaning of federal securities law.  Words such as "anticipates," "believes," "expects," "intends,"  "will," "should," "may," and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect Noble Energy' s current views about future events. They include estimates of oil and natural gas reserves and resources, estimates of future production, assumptions regarding future oil and natural gas pricing, planned drilling activity, future results of operations, projected cash flow and liquidity, business strategy and other plans and objectives for future operations. No assurances can be given that the forward-looking statements contained in this news release will occur as projected, and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, without limitation, the volatility in commodity prices for crude oil and natural gas, the presence or recoverability of estimated reserves, the ability to replace reserves, environmental risks, drilling and operating risks, exploration and development risks, competition, government regulation or other actions, the ability of management to execute its plans to meet its goals and other risks inherent in Noble Energy's business that are discussed in its most recent annual report on Form 10-K and in other reports on file with the Securities and Exchange Commission. These reports are also available from Noble Energy's offices or website, http://www.nobleenergyinc.com. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Noble Energy does not assume any obligation to update forward-looking statements should circumstances or management's estimates or opinions change.

The Securities and Exchange Commission requires oil and gas companies, in their filings with the SEC, to disclose proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. The SEC permits the optional disclosure of probable and possible reserves, however, we have not disclosed the Company's probable and possible reserves in our filings with the SEC. We use certain terms in this news release, such as "discovered natural gas resources," which are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. The SEC guidelines strictly prohibit us from including these estimates in filings with the SEC. Investors are urged to consider closely the disclosures and risk factors in our most recent annual report on Form 10-K and in other reports on file with the SEC, available from Noble Energy's offices or website,

http://www.nobleenergyinc.com.  
SOURCE Noble Energy

Link to source: http://investors.nobleenergyinc.com//releasedetail.cfm?ReleaseID=849242

Woodside drops Leviathan, but small FLNG may still happen | Interfax

Woodside drops Leviathan, but small FLNG may still happen

By Leigh Elston and Sara Stefanini
Posted 21 May 2014 14:14 GMT

A Noble Energy and Transocean rig in the Tamar field offshore Israel. (Transocean)

After 18 months of negotiations, Woodside has finally abandoned a $2.7 billion deal to take a 25% stake in the Leviathan gas field, saying it was not commercially viable.

“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,” Woodside Chief Executive Peter Coleman said on Wednesday.

Woodside had been waiting for further clarity on Israel’s gas export tax before signing off on the farm-in. The Australian LNG player was said to be disappointed by the severity of the tax, having calculated the profitability of its Leviathan investment based on far lower taxation, Interfax understands.

The Perth-based company’s share price on the Australian stock exchange dropped immediately after the news was announced, but quickly bounced back and closed slightly higher than the day before.

However, some argue the growth in regional gas demand in the East Mediterranean had weakened the strategic case for bringing in an Australian LNG player with a customer base in East Asia.

The surge in interest in Israeli gas from private companies in Turkey, Egypt and Jordan over the past year “has pushed the need for LNG into a later phase of development versus our earlier plans”, Charles Davidson, chief executive and chairman of Noble Energy – operator of the Leviathan field – said on Wednesday.

Still, Woodside may yet join a slimmed down FLNG-led second phase of the Leviathan development. “We might have a smaller-scale joint project together with Woodside for FLNG for which we will allocate, say, 4 trillion cubic feet [113 billion cubic metres] of gas,” one partner close to the project told Interfax. “But for now we will continue full steam ahead with promoting pipeline exports of gas to neighbouring countries and domestic market.”

The project partners have an option to revive the non-binding letter of intent signed with the Levant LNG Marketing Corp. – a joint venture of Daewoo Shipbuilding and Marine Engineering, NextDecade and D&H Solutions – and the Tamar partners to build a 3 mtpa FLNG facility offshore Israel.


Tamar transfer

While the agreement was initially for the Tamar field, it would not be a problem to transfer it to Leviathan, a source told Interfax. Gazprom Marketing & Trading signed a heads of agreement with the JV early in 2013 to market the full 3 mtpa of LNG from the facility for 20 years.

“It is imperative the Leviathan partners develop the FLNG export scheme along with pipeline projects – and Woodside could have contributed a lot in terms of bringing in LNG clients, technology and financing,” said Amit Mor, chief executive of Israel-based financial consulting firm Eco Energy.

“Although the pipeline projects to Turkey, Egyptian liquefaction projects and Jordan are the most economically viable and strategically important, they are still prospective and are facing geopolitical challenges,” Mor said.

Even the strong financial support Woodside would have brought to Leviathan – which has an upstream cost estimated at $5 billion – became increasingly unnecessary over the course of negotiations. A $2 billion bond offering by Delek Group units Delek Drilling and Avner Oil in May was more than five times oversubscribed, demonstrating international investors’ financial appetite for the Leviathan project.

Cash flow from the Tamar gas field, which started production in April 2013, has also bolstered the finances – and market confidence – of Noble and Delek.

“At the time Woodside came in, [Delek group controlling shareholder Yitzhak] Tshuva did not have much cash – but that has changed dramatically,” said the source. “At this point, why [would he] reduce his stake in Leviathan to 30% when he could keep it at 45%?”

Delek’s successful bond issue has offered significant encouragement to minority Leviathan shareholder Ratio Oil. The company will now look to raise roughly $200 million through bonds, a source told Interfax. The Leviathan partners might also sell a 5% stake in the project to a financial partner to bring in additional cash.

“There have also been some general enquiries among financial investors to purchase a small stake of Leviathan – and it will be at a much higher price than Woodside would have paid,” the source said.
Even if Woodside’s experience became of diminishing strategic importance to the Leviathan partners, the threat of a major foreign investor withdrawing from the project – potentially delaying its development – may have proved a useful tool for bargaining with Israeli regulators, a source told Interfax.


Last-minute lease

In the hours before Coleman was due to sign the farm-in agreement on 27 March, the Leviathan partners secured both a lease for the Leviathan field development and reached a settlement with the anti-trust commissioner over Noble and Delek’s alleged monopoly over the gas market in Israel.

“I think everybody could read the new setting, and they got what they wanted. Negotiations with Woodside offered [the Leviathan partners] leverage vis à vis the ministries here; they reached an agreement with the anti-trust authority and secured a production licence with the ministry of energy,” the source said. “Once these were in place – and having more money than they had before – why should Noble and Delek reduce their stakes?”

Link to source: http://interfaxenergy.com/gasdaily/article/8428/woodside-drops-leviathan-but-small-flng-may-still-happen?dm_i=1ZRI,2H9IW,G3ABZ6,90VDO,1

Woodside terminates Leviathan deal | Jerusalem Post

Woodside terminates Leviathan deal

By SHARON UDASIN

05/21/2014 09:34

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After months of negotiations, Woodside says that the parties failed to reach a commercially acceptable outcome.

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.

Related:

• Woodside entrance into Leviathan gas field consortium still uncertain

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

Woodside Petroleum ponders a Leviathan Plan B | Brisbane Times

Woodside Petroleum ponders a Leviathan Plan B (01:16)

Woodside Petroleum has been struggling to complete its Israeli gas deal and sources are now telling us the company is starting to seriously think about other options, possibly a return of capital to shareholders. 04/05/14

Link to source: http://media.brisbanetimes.com.au/national/selections/woodside-petroleum-ponders-a-leviathan-plan-b-5398801.html

Woodside output rises, but no Leviathan deal yet | Wall Street Journal

April 16, 2014, 8:26 p.m. EDT

Woodside output rises, but no Leviathan deal yet

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By Ross Kelly

SYDNEY--Woodside Petroleum Ltd. (WPL.AU), reporting a 16% rise in first-quarter production, said it continues to be frustrated in its efforts to finalize a deal to buy part of a giant natural gas discovery offshore Israel.

Woodside said it remains in talks with the Israeli government and partners in the Leviathan gas field, which include Noble Energy Inc. and Delek Drilling LP, after a March 27 deadline to seal a revised deal slipped.

The negotiations have already dragged on for more than a year, adding to investor worries about Woodside's ability to continue growing in its oil and natural gas production in the longer term. Last year, Woodside and partners including Royal Dutch Shell PLC (RDSB) delayed a decision on the multibillion-dollar Browse gas-export project offshore Western Australia state by at least two years.

In February, Woodside agreed to reduce its planned stake in Leviathan to 25% from an earlier plan struck in late 2012 to take a 30% stake.

"Discussions continue with the parties and the Israeli government with a view to resolving the remaining issues and executing definitive agreements," Woodside said.

Talks were drawn out last year as the Israeli government drew up a policy for gas exports. It finally approved the export of up to 40% of Leviathan's reserves in the middle of last year, with the rest earmarked for domestic supply.

The update on Leviathan came as Woodside--Australia's second-biggest oil company by production behind BHP Billiton Ltd. (BHP.AU) -- said revenue for the three months through March rose to US$1.68 billion. The increase was driven largely by its Vincent oil project offshore Western Australia coming back online after repairs last year.

Also on Thursday, Australian oil company Santos Ltd. (STO.AU) said its first-quarter revenue rose by 28% to 913 million Australian dollars (US$856 million), despite lower production, due to higher oil sales.

Write to Ross Kelly at ross.kelly@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires 

Link to source: http://www.marketwatch.com/story/woodside-output-rises-but-no-leviathan-deal-yet-2014-04-16

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Delek Drops as Woodside Delays Leviathan Deal: Tel Aviv Mover | Bloomberg

Delek Drops as Woodside Delays Leviathan Deal: Tel Aviv Mover

By Shoshanna Solomon Mar 30, 2014 12:07 PM GMT+0300

Delek Group Ltd. (DLEKG) fell the most in four weeks after Australia’s Woodside Petroleum Ltd. (WPL) missed an investment deadline in Israel’s largest gas field.

The shares of the company, which owns stakes in the offshore Leviathan field via its Delek Drilling-LP and Avner Oil Exploration LLP units, declined 1.7 percent, poised for the biggest retreat since March 3, to 1,341 shekels at 11:50 a.m. in Tel Aviv. The benchmark TA-25 (TA-25) Index rose 0.2 percent.

Woodside, Australia’s second-largest oil producer, missed its March 27 deadline for completing the purchase of a stake in Leviathan. Talks are continuing “with a view to resolving the remaining issues,” the Perth-based company said March 28. Woodside planned to buy a stake worth as much as $2.6 billion in the field.

“There’s investor disappointment,” Guil Bashan, an analyst at IBI-Israel Brokerage & Investments Ltd., said by phone today. “It raises the specter that the deal may not be signed and that the companies will have to raise money to be able to develop the field.” The deal will eventually be signed, “one way or the other”, he said.

Shares of Delek Group have advanced 31 percent in the last 12 months, making it the fifth-best performing stock on the benchmark measure, which gained 13 percent in the period. The company sold non-energy assets to focus on its oil and gas business and its Tamar field started production last year.

Delek Drilling lost 2.4 percent, Avner retreated 2.3 percent and Ratio Oil Exploration 1992 LP (RATIL), another partner in the field, declined 2.2 percent.

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net Claudia Maedler, Robert Lakin

Link to source: http://www.bloomberg.com/news/2014-03-30/delek-drops-as-woodside-delays-leviathan-deal-tel-aviv-mover.html