new thread - future pricing, page-19

Woodside deal hits new snag in Israel

August 01, 2013
WOODSIDE Petroleum may be squeezed for more cash in its $US1.25 billion ($1.39bn) push to buy into Israel's giant Leviathan gas project because the field's owners are keen to pipe gas to Turkey at the expense of some liquefied natural gas capacity Woodside wanted to operate.

As reported in The Weekend Australian on Saturday, Leviathan operator Noble Energy last week threw more doubt on the Woodside deal, saying uncertainty over Israel's gas export policy was holding it back and that regional exports may be favoured.

Israel's Haaretz news group is now reporting Noble and its partners want to export gas to the Turkish coast via an offshore pipeline.

This would be cheaper and faster than exporting the same volume of gas through LNG but would still net high gas prices.

It could increase the value of the resource from where it was in December, when Woodside struck a conditional deal to pay $US696 million upfront to buy 30 per cent of the project and two further milestone payments to bring the value to $US1.25bn, the report said, without naming a source.

Fewer LNG exports would also reduce the value Woodside, which operates the North West Shelf and Pluto LNG projects in Western Australia, brings to the table. The conditions of the deal, under which Woodside would operate the LNG plant, were not revealed and seven months later, the payment has not been made.

A Woodside spokesman said the company was aware of the Haaretz report but refused to say whether it was accurate.

Last week, Noble president Chuck Davidson said the Woodside payment was being held up amid a high court challenge that could require parliamentary approval for the Israeli cabinet's recently formed policy to allow 40 per cent of the nation's gas to be exported.

He also said there was growing regional demand that could change some Leviathan gas from LNG exports to "regional export", but he was not more specific.

The Haaretz report said that when there was certainty around policy, the Leviathan partners would review their options, based on the prospect of issuing gas to Turkey.

Turkey, which pays a hefty $US10-plus per million British thermal units for its imported gas, has been previously flagged as an option for the Leviathan gas but there have been questions raised over security.

In June, Israel's Globes newspaper said the Leviathan joint venture, which includes Delek Group and Ratio Oil and Gas, had been granted permission to hold talks to export gas to Turkey, Jordan and the Palestinian Authority.

In February, Globes reported that talks between Leviathan and Turkish companies had canvassed sales of 8 billion cubic metres a year, which is the equivalent of 6 million tonnes a year of LNG exports.

This would be more than one train of LNG from Leviathan, which has previously been slated as being able to support two or three LNG export trains from the 50 per cent of gas understood to be able to exported from Leviathan under the Israeli gas policy.

Cheers,
Stevo