Woodside set to sign for 25% Leviathan stake as Myanmar approves exploration acreage

Woodside Petroleum’s offshore expansion has taken a large step forward with the group expected to sign final agreements overnight Thursday to take up a quarter stake in Israel’s giant Leviathan project, just as it was awarded additional exploration acreage in Myanmar.

Woodside is finalising the purchase of a 25 per cent stake in the Leviathan project for an estimated $US2.71 billion, with the deal delayed pending clarification of the Israel government’s domestic reservation policy.

Earlier it signed a memorandum of understanding, which established the parameters for its participation with the deal to be finalised and signed March 27, according to Israeli media reports.

Initially Woodside had sought a 30 per cent stake in the project. With Woodside taking a slightly smaller stake, the other leading investors in the project include Noble Energy with 30 per cent and the Delek group (16.9 per cent).

Under licence conditions imposed by the Israeli government, it is expected that as much as 10 billion cubic metres of gas annually must be set aside to supply the domestic Israel market which would leave up to 8 billion cubic metres annually for export.

Along with piping gas to regional markets in Egypt and Turkey, partners in the project have been looking at liquifying some of the output for export further afield.

The finalisation of Woodside’s participation came as it was awarded four additional exploration areas in Myanmar – a mix of shallow water and deepwater acreage – with UK energy group BG. This brings to six the number of exploration blocks in the country Woodside holds an interest in.

Separately, work is underway with Korea’s Daewoo in another offshore block while it also has an interest in a further block with well known local businessman U Moe Myint, dubbed by the Financial Times late last year as ”Myanmar’s go-to tycoon”.

All of the acreage is in the Rakhine block, off the country’s west, the same area where the venture with Daewoo is also exploring, along with the venture with U Moe Myint.

The acreage being explored with Daewoo is adjacent to the series of discoveries made by Daewoo on the offshore Shwe structure where reserves have been put at more than 3.5 trillion cubic feet, which is already supplying China, via a $US3.7 billion pipeline.

With the newly awarded acreage, Woodside said seismic surveys will be conducted before any decisions are made on drilling programs.

Woodside and BG have the same local partner in two of their additional offshore blocks, with Woodside the operator on two of the blocks and BG the operator on the other two blocks.

Despite Woodside’s optimism over the prospects for the Leviathan project, it has run into stiff local opposition, with local groups writing to Woodside on Wednesday, along with large shareholders such as AMP, Australian Foundation Investment Co and Argo Investments.

The letter, signed by the Association for Progressive Democracy and the Society for Sustainable Economics, said the government has yet to put in place the legislation needed to permit gas exports from Leviathan.

Additionally, they said exports via a pipeline ”are unlikely given current Middle East politics” with Woodside ”naive” to assume a floating gas processing plant would be an alternative.

”That assumes the Israeli government would accept the security costs and insurance burdens of such a project,” it said, which would demand a rise in royalty payments.

”You should expect serious public opposition to large-scale exports in addition to public demands for local price controls.”

Source: The Sydney Morning Herald

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