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Woodside Petroleum (ASX: WPL) to Invest in Israeli LNG

Purchasing Share in Leviathan Field

Written by Swagato Chakravorty
Posted December 4, 2012

Australia’s Woodside Petroleum Ltd. (ASX: WPL), is set to buy a stake in Israel’s largest natural gas field for $2.3 billion.

An initial $696 million will buy Woodside a 30 percent share in the Leviathan field from a group of partners including Noble Energy (NYSE: NBL), Delek Drilling LP (TLV: DEDR.L), Avner Oil Exploration LLP (TLV: AVNR.L), and Ratio Oil Exploration (TLV: RATI.L).

The project is expected to contain up to 17 trillion cubic feet of gas, and under the terms of the deal, Woodside can manage any LNG development there. The first output for the Israeli gas market isn’t expected until 2016.

Businessweek reports on the possible risks in a politically unstable area:

“There may have been better opportunities elsewhere, albeit at higher prices,” [Fat Prophets analyst David] Lennox said. “The rewards really come with oil and this is not really a proven oil zone. There’s also a potential security risk. That region isn’t going to have absolute peace.”

When laws are enacted allowing Israel to export LNG, Woodside will make another payment of $200 million, and another $350 million when a final investment decision is made on a particular LNG project. Also, there are provisions for yearly LNG revenue sharing payments (up to $1 billion) and $50 million that can be used toward a deep water exploratory well, Buinessweek reports.

As a result of this deal, Noble’s Leviathan share will decrease to 30 percent from its earlier 39.66 percent. The Texas company has discovered almost 35 trillion cubic feet of gas in the Eastern Mediterranean area with its partners.

From Businessweek:

“Woodside introduces to Leviathan the full package necessary to develop Leviathan to the local market and to develop LNG projects to export gas from offshore Israel,” Yossi Abu, chief executive officer of Hertzliya Pituach, Israel- based Delek Drilling, said by phone today. “It brings to the table LNG expertise, financial strength, and access to the premium market of LNG in the world, the Asian market.”

Woodside operates the Pluto liquefied natural gas (LNG) project in Australia. Shares rose 0.9 percent to A$34.11 in Sydney on Monday. The company has gained 11 percent this year overall.

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