MELBOURNE-Australia's Woodside Petroleum Ltd. (WPL.AU) Monday said it has struck a deal to buy a 30% stake in the Leviathan field offshore Israel, which is estimated to contain about 17 trillion cubic feet of recoverable natural gas, for an initial US$696 million upfront plus further payments that would be triggered in the future.
The deal sets Woodside up to be the operator of any liquefied natural gas development of the field.
The company said an agreement in principle has been signed with Leviathan venture partners Noble Energy Mediterranean Ltd., Delek Drilling LP (DEDR.L.TV), Avner Oil Exploration LP (AVOGF)) and Ratio Oil Exploration (1992) LP (RATI.L.TV) to buy an interest in the two petroleum licenses that contain the field.
Noble Energy, which targets initial production to the domestic gas market in 2016, will remain the main operator.
"We have a proven track record of safe and reliable operations in Australia and being selected as the Leviathan joint venture's preferred partner in a competitive bidding process demonstrates the value of our LNG development capabilities," said Peter Coleman, chief executive of Woodside.
The company said the agreement involves the initial payment, with staged payments of US$200 million once laws permitting LNG exports from Israel are in force and US$350 million on a final investment decision relating to an LNG development. Woodside also faces potential annual LNG payments equal to 11.5% of its revenue above an agreed escalating price threshold but capped at US$1 billion, and up to US$50 million relating to costs associated with the drilling of a deep water exploration well for late 2013.
The deal is subject to a number of conditions, including the completion of due diligence and necessary government and regulatory approvals. If it goes ahead, Noble Energy's interest in the Leviathan venture will fall to 30% from 39.66%, Delek and Avner will each own 15%, down from 22.67% currently, and Ratio's interest will drop to 10% from 15%.