Woodside has reached an agreement in principle to acquire a participating interest in each of the 349/Rachel and 350/Amit petroleum licences which contain the Leviathan field off the coasts of Israel.
Woodside would buy a 30% stake in the project, which is one of the largest recent gas discoveries worldwide and is estimated to contain about 17 tcf (481 bcm) of recoverable natural gas. Noble Energy, the operator of the field with 39.66%, would reduce its stake to 30% by selling a 9.66% interest to Woodside. Delek Drilling and Avner Oil, which own 22.67% in the joint venture, would sell 7.67% each, reaching 15% of the new joint venture. Finally, Ratio Oil Exploration would reduce its stake from 15% to 10%.
The agreement involves an initial upfront payment of $696m, with staged contingent payments of $200m once laws permitting LNG export from Israel are in force and $350m on a final investment decision in relation to an LNG development. Potential annual LNG revenue sharing payments equal to 11.5% of Woodside’s incremental revenue above an agreed escalating price threshold, over the life of the project (capped at $1bn) and carry of expenditure up to $50m in relation to costs associated with the drilling of a deep oil exploration well targeted for late 2013.
The agreement will also allow Woodside to participate in further exploration opportunities in the Leviathan licences. Woodside will be the operator of any LNG development of the field, while Noble Energy will remain upstream operator. Noble Energy targets initial production to the domestic gas market in 2016. A pre-FEED (front-end engineering and design) assessment for an LNG project is underway.