Woodside Sailing Into Wide Blue Yonder

From Business Day

By Paddy Manning

THE politics of the Middle East will challenge Woodside Petroleum but rising costs in Australia – and the continuing depletion of conventional oil and gas reserves – make such risk-taking abroad a part of doing business.

On Tuesday Woodside said it would invest up to $1.3 billion to take a 30 per cent share of the Leviathan gas field from Houston-based explorer Noble Energy, as well as rights to operate any liquefied natural gas plant built to export the gas – probably to Europe.

As chief Peter Coleman told investors on the analyst call, for an Australian company the planned domestic gas and potential LNG projects contemplated by the joint-venture partners were ”an order of magnitude larger than any other foreign direct investment that’s gone into Israel”.

The offshore territory itself, within Israel’s exclusive economic zone up to 200 nautical miles from the coast under international law, does not seem to be heavily contested. Off Gaza, about 100 kilometres away, Palestine has its own gasfields, which are recognised by Israel but remain undeveloped more than a decade after discovery – despite an agreement with BG Group – due partly to a long-running price dispute with Israel.

The 349/Rachel and 350/Amit petroleum licences within the Leviathan field are about 20 kilometres from the Cyprus border, which was agreed with Israel in 2010, and are more than 50 kilometres from the Lebanese and Egyptian boundaries. Lebanon submitted a maritime border claim to the UN in August 2010 – according to a Bloomberg report, Hezbollah declared it would not allow Israel to ”plunder Lebanon’s maritime assets”. The Lebanese claim – disputed by Israel, but apparently largely resolved – did not cover the Leviathan field.

Certainly, there is more gas off Israel than it alone will need. In an investor presentation overnight Noble Energy underscored the size of the resource it has discovered in the eastern Mediterranean.

In Israel and Cyprus, Noble had six consecutive discoveries totalling a massive 35 trillion cubic feet of gas – rivalling Australia’s North-West Shelf – and so far the company had booked only a sixth of that as reserves. Leviathan, which will produce gas from 2016, holds about half the gas Noble has discovered.

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