Woodside closes in on entry to deepwater Leviathan gas project offshore Israel

Offshore staff

PERTH, Australia – Woodside has moved a step close to taking an interest in the giant Leviathan gas field offshore Israel.

The company has agreed to a non-binding memorandum of understanding with operator Noble Energy Mediterranean and partners Delek Drilling, Avner Oil Exploration, and Ratio Oil Exploration (1992).

This could lead to Woodside acquiring 25% of the petroleum licenses containing Leviathan, 349/Rachel, and 350/Amit. Negotiations are expected to be completed by March 27.

Noble estimates the field’s 2C contingent resource at 18.9 tcf (535 bcm) of natural gas and 34.1 MMbbl of condensate. Water depth is around 5,500 ft (1,676 m).

Woodside would operate any LNG development of the field, while Noble Energy would remain upstream operator.

The MoU contemplates supplying gas for Israel’s domestic needs, LNG exports, and supply to neighboring countries. It could involve the following conditional payments:

$850 million upon completion of the transaction under a fully termed agreement$350 million on a final investment decision for an LNG development or payments of up to $350 million on predetermined export project milestones5.75% of Woodside’s wellhead export gas revenue, taking effect after at least 2 tcf (56 bcm) have been exported from the Leviathan field, and capped at $1.3 billionA royalty payment of 2.5% on commercial oil production from the deep prospect in the Mesozoic, following payback of development costs.

These transactions remain subject to execution of a fully termed agreement and regulatory approvals from the Israeli government.

Charles D. Davidson, Noble Energy’s chairman and CEO, said “Woodside…brings extensive global expertise in LNG operations and marketing to the partnership. Their addition to the project will result in substantial added value while also bringing us much closer to when we will be able to sanction Leviathan for development.”

02/07/2014

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