Analysis: Israeli natural gas fields hold big promise for Noble Energy

Mon Feb 10, 2014 2:48pm EST
 
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By Ernest Scheyder

NEW YORK (Reuters) - Noble Energy Inc (NBL.N: Quote) slashed the risks to its colossal Israeli natural gas project by selling a stake to Australia's largest oil producer and sealing a crucial supply deal with a Palestinian power company in one of the world's political flash points.

Both steps, carefully choreographed over the past month, should help Noble achieve its goal of doubling production by 2018 and mitigate Wall Street's fears about the company's prospects in the politically unstable region.

In a deal worth $2.55 billion in cash and future revenue, Australia's Woodside Petroleum (WPL.AX: Quote) agreed last week to help Houston-based Noble Energy and three Israeli companies develop the offshore natural gas field Leviathan. The field, along with smaller ones nearby, holds nearly 40 trillion cubic feet of natural gas, the same amount consumed each year in the United States.

The deal came a month after the Noble Energy consortium signed a $1.2 billion contract to begin supplying natural gas to the Palestine Power Generation Co. in a couple of years.

The group is already shipping gas to Israel from a small field near Leviathan, meaning Israel and the Palestinian Authority will both rely on the same source for natural gas.

Woodside's experience in liquefied natural gas (LNG) projects will help regional exports begin sooner. Selling to a broad range of neighboring countries should reduce the project's appeal as a target for attacks, security analysts say.

Regionally, Jordan, Turkey and Egypt are hungry for natural gas supply and could be future buyers, analysts say.

In a sign of how vital the natural gas is to Israel, its military patrols the seas above the deposits to defend against any potential attacks.   Continued...

 
An officer points as he stands on a tanker carrying liquefied natural gas in the Mediterranean, some 10 km (6 miles) from the coastal Israeli city of Hadera January 22, 2014. REUTERS/Baz Ratner