Woodside buys stake in Israeli gas field
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Nicholas Grove is a Morningstar journalist.
Woodside Petroleum (WPL) on Monday said it has agreed to buy a 30 per cent stake in an offshore Israeli gas field for an initial upfront payment of US$696 million.
The Leviathan field contains around 17 trillion cubic feet of recoverable natural gas and is one of the world's largest recent gas discoveries, the company said.
The deal could also see Woodside play a key role in the potential development of a liquefied natural gas (LNG) industry in Israel and will also allow the company to participate in further exploration opportunities in the Leviathan licences.
In a statement, Woodside said it will be the operator of any LNG development of the field, while the US-based Noble Energy will remain upstream operator.
Noble Energy is targeting initial production to the domestic gas market in 2016, while a pre-FEED (front-end engineering and design) assessment for an LNG project is underway, Woodside said.
Woodside CEO Peter Coleman said the agreement was a significant step towards realising the company's ambition to secure world-class growth opportunities.
"We have a proven track record of safe and reliable operations in Australia and being selected as the Leviathan joint venture's preferred partner in a competitive bidding process demonstrates the value of our LNG development capabilities," he said.
"Acquiring an interest in these permits is an exciting opportunity to grow our portfolio in the emerging Eastern Mediterranean basin and we look forward to finalising the agreement."
Morningstar sector head of basic materials, energy and utilities, Mark Taylor, was less than enthusiastic about the deal and believed it carried a good deal more sovereign risk when compared to Woodside's other operations.
"It looks like it's a pretty big gas accumulation, and maybe they're getting in there without having to put too much skin in the game initially … but personally, I think it's a distraction," he said.