Woodside Likely to Sign Pact With Israel's Leviathan This Week

Woodside Petroleum, Israeli gas field partners’ still at odds over demand for higher price.

An agreement to bring in the Australian energy giant Woodside Petroleum as a partner in Israel’s Leviathan natural gas field will likely be inked this week after close to a year of negotiations.

Leviathan’s three current partners - Delek Group, Noble Energy and Ratio Oil Exploration - are in New York this week to meet with Woodside executives over the final sale terms.

The main sticking point is the demand by the Leviathan partners that Woodside increase the $2.5 billion offer it made last December by 30%.

The December agreement was supposed to be completed within two months, but the failure of the Israeli government to clarify its policy on natural gas exports, the key to Woodside’s participation in Leviathan, held up the deal. When the government did finally set its export policy, the Australian company balked at paying the first milestone payment of the agreement until it was clear that the High Court of Justice would not overturn the government’s decision. The court ultimately rejected petitions filed against the government’s decision last month.

In recent months there has been almost no contact between the Leviathan partners and Woodside. Immediately following the High Court’s decision, Woodside said it was ready to resume talks. Since the initial talks, the estimated reserves of gas in Leviathan have been revised upward by about 20%, increasing the value of the field.

Another obstalce is a warning by the Anti-Trust Authority’s in September 2011 that the Leviathan partnership’s control of Israeli natural gas resources, including the smaller Tamar field, threatens competition. Hearings on the matter concluded last May, but Anti-Trust Commissioner David Gilo has yet to decide. He can have the partners sell part of their stakes in Leviathan or other natural gas fields they own.

Right now, Delek controls 45% of Leviathan, which has estimated reserves of close to 19 trillion cubic feet of gas. The Texas company Nobel holds 40% of the field and Ratio the rest.

Albatross