Woodside sees 80% exports from Leviathan

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Woodside plans to invest $1.12 billion in developing Leviathan, the company's largest capital investment in 2013.

Woodside Petroleum Ltd. (ASX: WPL) believes that the Israeli government will allow the export of up to 80% of the Leviathan natural gas field. In a presentation yesterday, the company said that Leviathan would initially be developed to meet Israel's domestic needs, after which exports via a liquefied natural gas (LNG) facility. 20-25% of Leviathan's gas will be designated for the domestic market.

In the financial report for 2012, Woodside said that it planned to invest $1.12 billion in developing Leviathan, the company's largest capital investment in 2013.

Woodside added, "We expect to add a major new contingent resource booking of about 890 MMboe (million barrels of oil equivalent) for the Leviathan gas field on completion of the farm-out agreement." 890 MMboe equals 4.94 trillion cubic feet (TCF) of gas - 30% of the estimated gas reservoir.

It should be noted, however, that "barrels of oil equivalent" does not necessarily refer to natural gas, but to potential hydrocarbons in general, and the conversion to TCF is for convenience.

Australia's Woodside is a global leader in LNG ventures. In late 2012, the company agreed to acquire 30% of Leviathan's rights, after CEO Peter Coleman understood from Prime Minister Benjamin Netanyahu that Israel would permit gas exports.

Woodside has agreed to pay Leviathan's current owners - Noble Energy Inc. (NYSE: NBL), Delek Group Ltd. (TASE: DLEKG) and Ratio Oil Exploration (1992) LP (TASE:RATI.L) - $1.25 billion for 30% of the rights. A deal is subject to approval of the Tzemach Committee's report on gas exports.

Woodside stated, "We reached an agreement in principle to take a 30% participating interest in permits covering the Leviathan gas field offshore Israel, one of the biggest recent gas discoveries worldwide. The transaction, which remains subject to conditions including execution of fully termed agreements, completion of due diligence and necessary approvals, positions Woodside to benefit from Israel’s strongly growing domestic gas market, and play a key role in the potential future development of an LNG industry in Israel."

The reference is the construction of an LNG facility, at an investment of several billion dollars. Leviathan CFO Lawrie Tremaine said, "With potential investment spending at Browse and Leviathan, we have maintained $4.1 billion of available funds in the form of cash and undrawn debt facilities."