Australia's Woodside Petroleum Ltd has agreed to buy a 30 percent stake in Israel's huge Leviathan natural gas field in a deal that could be worth as much as $2.5 billion.
The announcement on Monday ended an intense bidding war between a number of foreign firms interested in a share of Leviathan. The field, discovered in 2010, holds an estimated 17 trillion cubic feet of gas, making it the world's largest offshore discovery of the past decade.
Woodside, Australia's biggest oil and gas firm, said it would be the operator of any liquefied natural gas (LNG) development of the field some 80 miles (130 km) off the coast of Israel, once energy poor but now expected to become a gas exporter by the end of the decade.
Woodside said the agreement involves an initial upfront payment of $696 million, a further payment of $200 million once laws permitting LNG export were in force and a $350 million payment on a final investment decision for LNG development. It is also subject to potential annual LNG revenue sharing payments equal to 11.5 percent of Woodside's incremental revenue above an agreed escalating price threshold over the life of the project, capped at $1 billion.
Ratio Oil Exploration, a partner in the US-Israeli consortium currently developing the field, told the Tel Aviv Stock Exchange the deal could be worth up to about $2.5 billion.
"It's tough to understate the significant effects this move will have on the Israeli energy sector, and the economy in general," Ratio chief executive Yigal Landau said in a statement.
In the deal, Texas-based Noble Energy Inc, which will remain the upstream operator, will sell 9.66 percent of its 39.66 percent share in the field. Delek Drilling and Avner Oil Exploration will each give up 7.67 percent of their 22.67 percent stakes. Ratio will sell 5 percent of its 15 percent stake.
Woodside said it would use existing funds for the deal and no further financing would be required.
Until now Noble had been the main foreign operator in Israel's energy market.
"The entry of Woodside will bring additional international diversity to the Eastern Mediterranean area," Noble Chairman and CEO Charles Davidson said in a statement.
EXPENSIVE AUSTRALIAN LNG PROJECTS
Woodside said initial production for Israel's gas market was targeted for 2016, while a pre-FEED (front-end engineering and design) assessment for an LNG project was underway. The Australian firm's other three major LNG projects, Pluto, Browse and Sunrise, target Asian