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May 21, 2014 8:59 am
Peter Coleman, the group’s chief executive, said in a statement to the Australian Stock Exchange on Wednesday that it had been a “difficult decision” to withdraw from the project.
“All parties have worked very hard to secure an outcome which would be commercially acceptable, but after many months of negotiations it is time to acknowledge we will not get there under the current proposal,” Mr Coleman said.
Remarks by executives from the other companies involved in Leviathan indicated Woodside was retreating because of a shift in initial plans for the field from gas liquefaction – the Australian company’s field of expertise – to exports of gas to neighbouring countries via pipeline.
“The plans for development of the Leviathan discovery have significantly changed since we began the search for a partner approximately two years ago,” said Charles Davidson, chief executive of Texas-based Noble Energy, the US company that will operate Leviathan.
Leviathan, located in 5,550 feet of water in the eastern Mediterranean, holds an estimated 19tn cubic feet of natural gas – more than enough to satisfy Israel’s domestic needs – and has positioned the country to become a big regional exporter for the first time in its history.
Woodside and Leviathan’s partners had been in talks since late 2012, and signed a memorandum of understanding in February 2014.
The Australian company’s withdrawal leaves Noble with just under 40 per cent of the project, and Israeli companies Delek Drilling, Avner Oil Exploration and Ratio Oil Exploration holding the remaining shares.
Mr Davidson said the growth of regional markets for natural gas, which can be supplied by pipeline, was creating “dramatic changes” and had pushed the need for liquefied natural gas to a later stage.
“Now the focus is really on regional opportunities, including Egypt, Turkey, Cyprus and so on,” said an executive at one of the partners in the project who asked not to be named.
Work on Leviathan will begin at the end of this year. The field is due to start producing gas from a floating production, storage and offloading system to Israel and regional markets by 2017.
Demand for gas is growing among Israel’s neighbours including Egypt, which was formerly the region’s biggest exporter but is now experiencing shortages and considering importing Israeli gas. The disarray in Egypt’s gas sector has hit supplies to Jordan, formerly one of its biggest customers.
In January Leviathan’s shareholders signed a $1.2bn agreement to sell gas to the Palestinian Authority for use in a planned power plant in the West Bank, in the first of what they hope will be several bigger regional export deals.
Noble and its partners, which last year began producing gas at the smaller offshore Tamar field, are also talking to Jordan’s government and a consortium of companies in Turkey about large-scale gas export contracts.
Earlier this month, the companies signed a letter of intent to export up to 2.5tn cubic feet of natural gas over 15 years to an idle LNG plant in Damietta, Egypt, operated by Unión Fenosa Gas, a joint venture between Spain’s Gas Natural and Italy’s Eni.
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