Australian Firm Might Compete With Partners at Leviathan

Woodside agreed a month ago to acquire a 30% stake in the Leviathan natural gas field.

Australian oil and gas producer Woodside, which agreed a month ago to acquire a 30% stake in the Leviathan natural gas field, is considering selling its share of Leviathan's gas on the Israeli market independent from its partners.

This would inject new competition into Israel's natural gas market and perhaps dispel antitrust concerns by having Woodside compete against its partners at the Leviathan offshore field: Delek, Noble Energy and Ratio Oil Exploration.

The Israeli antitrust authorities say Noble and Delek hold a natural gas monopoly. The local market has been starved for gas since Egypt cut off supplies after the sabotage of pipelines in the Sinai Peninsula. The partnership is required to sell 25% of Leviathan's gas on the Israeli market.

In recent weeks, Woodside has been talks with the Israeli regulatory authorities about selling natural gas separately. The talks are an apparent effort to answer the antitrust commissioner's declaration that the current arrangement at Leviathan constitutes restraint of trade.

The proposed split in how the partners would sell the gas apparently only affects the portion destined for sale in Israel, not the gas to be sold abroad. The antitrust issue arises from the fact that Noble Energy and Delek own 78% of proven natural gas reserves in Israel through stakes that extend beyond the Leviathan project.

The Tzemach committee, which drew up recommendations on how much gas should be retained for use in the local market, projected that even by 2020, Noble and Delek would have at least an 80% share of the Israeli gas market. The panel says that in other countries, even when partners market gas separately, they usually end up selling the product on similar terms.

Sources in the gas exploration industry say that in addition to the technical and financial issues involved in Woodside marketing gas separately, it's unclear if competition would be increased. In addition, at least according to the agreement with Woodside, Noble Energy is the only partner responsible for supplying the Israeli market.

Yaron Kaminsky