Noble Shrugged

Noble Energy Sees Egypt, Jordan as Israeli Gas Field’s Main Clients

Australia’s Woodside Petroleum, in talks to take a 30% stake in the Leviathan project, would be a loser in the strategy.

Noble Energy, the U.S. company leading the development of the giant Leviathan offshore gas field, confirmed over the weekend that it plans to target nearby markets like Egypt and Jordan rather than ship the product further afield as liquefied natural gas.

CEO Charles Davidson told an investor convention in Miami that even though the Leviathan business would include LNG, the major export markets would be nearby and get the gas through pipelines. This would let the Leviathan partners begin exporting more quickly and cheaply. Davidson did not mention Turkey, Cyprus or Greece as export markets.

“We still believe we’ll have a component of LNG in there, but it will probably not be as many trains,” Davidson said in remarks reported by Sydney-based daily newspaper The Australian. “It could be floating LNG, or it could be LNG over in Cyprus.”

Davidson’s remarks appear to be targeted at Australian energy giant Woodside Petroleum, which is in talks with the Leviathan partners over changes to a plan for it to acquire a 30% stake in the project for $2.5 billion. Officials from the Leviathan partners — Noble, Delek Group and Ratio Oil Exploration — have met with Woodside representatives in the United States in an effort to iron out changes to the agreement crafted in December.

“I actually am excited about how, through the evolution of the market, the value has gone up,” Davidson told the conference. “We will be able to market more gas regionally at lower capital cost because all of these regional markets are basically using pipes, and in some instances they’re connecting the pipes that already exist.”

The discussions have centered around the partnership’s demand that Woodside pay more for the stake after the discovery that the field’s reserves are about 20% larger than thought in December. Also under discussion is forgoing liquefied-gas exports using an expensive land-based facility currently under construction. Instead, exports would go to Israel’s neighbors.

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

The partners also seek to reduce the dilution of their stake in the project because Woodside’s expertise in liquefied natural gas and opening markets to Asia has been undermined by the plan to target Israel’s neighbors.

Davidson said exports to neighboring countries through a pipeline would cut export costs and boost profitability, compared to the initial deal with Woodside. Gas exported to Egypt would be transported to liquefication facilities in the north of the country that are currently shut down due to Egypt’s gas shortages. In the case of Jordan, a pipeline would be extended from Sodom on the Israeli side of the Dead Sea.

Courtesy Albatross