Global energy giant Royal Dutch Shell will likely divest its 23.1% stake in Australia's Woodside Petroleum to avoid the risk of boycott by Arab countries, following Woodside's agreement to purchase a 30% interest in Israel's Leviathan natural gas field, an analyst from the Commonwealth Bank of Australia predicts.
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Analyst Luke Smith wrote in an industry review published yesterday that Anglo-Australian BHP Billiton might be interested in acquiring Shell's shares in Woodside, currently valued at about $7 billion.
"Given the geopolitical tensions in the Middle East and Shell's significant investments in the region outside of Israel, we anticipate a sell-down to dispel any perception amongst other Middle Eastern countries that Shell is investing either directly or indirectly in Israel," wrote Smith.
Shell dismissed the report as "speculation."
Shell maintains activity in a number of Arab countries, producing over 200,000 barrels a day in Oman and about 144,000 daily in the United Arab Emirates, while holding a 30% interest in Qatar's liquid natural gas project.
CBA pointed out that such a sale could help Shell finance additional investments in Australian oil and gas fields.
Three months ago the three partners in the Leviathan gas discovery - Noble Energy, Delek Group, and Ratio Oil Exploration - proclaimed Woodside the winner of a tender for acquiring 30% of the rights to the field, over Russia's Gazprom and France's Total. In addition to a $1.5 billion initial cost, Woodside is expected to pay in another $1 billion based on the future price of LNG worldwide.