"The West Australian" reports that Woodside Petroleum Ltd. (ASX: WPL) is considering joining a liquefied natural gas (LNG) consortium in Cyprus, instead of in Israel.
Woodside, which had planned to acquire 30% of the rights to the Leviathan natural gas field and to build an LNG plant in Israel for the export of gas to the Far East, is reconsidering this plan, after Leviathan partners Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc. (NYSE: NBL) signed a memorandum of understanding with the Cypriot government on Thursday to build an LNG plant there.
"The West Australian" says that none of the consortium's members have the know-how to build an LNG plant, which greatly increases Woodside's chances of joining it. Woodside is a global leader in building LNG plants, the cost of which starts at $6 billion, and can reach tens of billions of dollars.
"The West Australian" adds that Woodside's self-imposed deadline for closing the Leviathan deal is Sunday.
Woodside offered to pay Leviathan's partners - Delek, Noble Energy, and Ratio Oil Exploration (1992) LP (TASE:RATI.L) - $1.5 billion for the stake. Although the Israeli government decided last week to permit natural gas exports, Woodside apparently believes that constructing an LNG plant still faces many obstacles, the first of which is the petition to the High Court of Justice by Labor Party chairwoman MK Shelly Yachimovich and MK Reuven Rivlin (Likud) against gas exports.
The memorandum of understanding with the Cypriot government indicates that Cyprus has stolen a march on Israel in the race to build an LNG plant. Cyprus has already chosen a site for the plant, at Vasilikos on the island's southern coast, while Israel has not begun serious discussions about the possibility of building a plant. In addition, there have been reports that Woodside is worried about the threat from Hezbollah and others against any plant built in Israel.
The assumption is that if an LNG plant is built in Cyprus, there will be no need to build another plant in the southeastern Mediterranean basin. There are already enough natural gas discoveries in Cyprus to justify the construction of a basic LNG plant (one train) at a cost of $6-8 billion, and there are strong chances of further offshore discoveries in the coming years.
The Tzemach Committee recommends construction of an LNG plant only in territory controlled by Israel, in view of such a plant's great strategic importance.
Published by Globes [online], Israel business news - www.globes-online.com - on June 30, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013