NewMed CEO Yossi Abu: We'll become a global player

Leviathan platform  credit: PR
Leviathan platform credit: PR

The bid by BP and ADNOC for 50% of NewMed Energy, if it succeeds, is seen boosting the Israeli partnership's plans for LNG exports to Europe and regional exploration.

Participation units in NewMed Energy soared 37% on the Tel Aviv Stock Exchange yesterday following the announcement of an offer by BP and ADNOC (Abu Dhabi National Oil Company) to buy 50% of the partnership for NIS 7.1 billion, valuing NewMed at NIS 14.2 billion. NewMed Energy holds 45% of the rights in the Leviathan natural gas reservoir offshore from Israel. The offer by BP and ADNOC represents a 65% premium on the closing price of NewMed Energy participation units on Monday.

The offer is for the 45% of NewMed Energy participation units held by the public and 5% held by Delek Group. If a deal is completed, BP and ADNOC will hold 50% of NewMed Energy in equal shares and Delek Group will hold the other 50%. NewMed Energy will cease to be publicly traded.

Delek Group’s share price rose 17% yesterday, but that still leaves it with a negative twelve-month return on its shares of about 10%.

In September 2021, in accordance with the provisions of the government gas plan designed to avoid a gas monopoly in Israel and enable production from the Leviathan reservoir to proceed, NewMed Energy sold its holding in the Tamar gas reservoir to Mubadala Petroleum, also of Abu Dhabi, for $1 billion.

Plans to sell liquefied gas to Europe

Completion of the current deal will bring another major energy company into Israel’s natural gas industry. US company Chevron currently holds 25% of the Tamar reservoir and 40% of Leviathan, after becoming the operator of both reservoirs when it acquired Noble Energy in July 2020. Together with Aharon Frenkel, Mubadala Petroleum holds 22% of Tamar.

The process of selling the participation units in NewMed Energy, if it goes ahead, will take several weeks, until a meeting of unit holders is held. The management of the partnership, headed by Yossi Abu, will remain after the sale. NewMed Energy will set up a committee of three external directors to examine the bid from BP and ADNOC. It will be able to accept higher bids if any such are received, but the large premium offered by BP/ADNOC makes their bid likely to succeed.

The Leviathan reservoir, containing 21 TCF (trillion cubic feet) of natural gas, is the largest of Israel’s gas reservoirs - double the size of Tamar. It is currently held by NewMed Energy (45%), Chevron (40%), and Ratio Energies. The reservoir extends over 330 square kilometers in Israel’s economic waters. Development of the reservoir began in 2017, and the pipeline from it began to operate in 2019. The gas from Leviathan is currently sold to Israel, Jordan, and Egypt.

Among NewMed Energy’s plans after the sale to BP and ADNOC is completed is liquefaction of gas from the reservoir and its sale to Europe. A decision on the matter, which will involve an investment of $6-7 billion, is due to be made within a year. If the investment is approved, BP will station a gas liquefaction ship at Leviathan to produce LNG for export.

Besides development of Leviathan, NewMed Energy plans to take part together with its new partners in an auction of 20 new exploration blocks in Israel’s Economic Zone in July this year. Another possible area of cooperation could arise from NewMed Energy’s intention of starting gas exploration in Egypt and to bid in future auctions of exploration licenses in Egypt’s Economic Zone.

"It’s no secret that the intimate relationships that we have built in the past few years in the Arab world are very important and deep," NewMed Energy CEO Yossi Abu told "Globes". "It’s true of Egypt, and of course of the Emirates.

"ADNOC is the national oil company of Abu Dhabi. This is a company that holds nearly 5% of global daily oil production, an output of some four million barrels. Together with BP, this is a matter of two players with about 10% of the global energy market. For us, it’s as though we brought Messi to play for Beitar Jerusalem."

"We’ll go from a regional to a global player"

Abu says that the connection with BP began in meetings he held with the company’s regional VP in recent years. "I met him in Cairo in 2019 when we set up the regional gas companies association. I served as its first chairperson, and he replaced me."

Relations between the two sides grew closer, Abu adds, and at a certain stage, "We proposed to BP that it should take part in the next bid round for gas exploration licenses in Israel’s Economic Zone, because we saw the immense potential in a strategic connection with an international giant of this order of size. At that time, we were in the midst of the process of becoming listed for trading in London, but the markets cooled somewhat. So we said to ourselves: instead of going to London, let’s bring London to us.

"In the past three months we have been working on this intensively; it wasn’t easy," Abu added. "In order to examine the process and advance it, an independent committee of external directors has been appointed, in order to avoid any possibility of conflicts of interests, since Delek is selling only part of its holding. The deal is also not exclusive; if another company sees the potential and wants to offer more, it can. That is to say, the independent committee does not have its hands tied in any way."

Abu says that NewMed Energy is currently a leading regional player, supplying gas to Israel, Egypt, and Jordan, but "the entry of these new players will help us go from being a regional energy player to a global player.

"This is a move that will give a huge boost to the expansion project and the liquefaction ship plan that we are working on, the cost of which is estimated at $6-7 billion. The investment decision will be made within a year, and clearly our connection with two global companies with the resources and experience they both have will be very significant."

BP, headed by Bernard Looney, has a market cap on the London Stock Exchange of £90 billion, and posted revenue of $249 billion in 2022. It has oil and gas production activity in 62 countries, and employs some 68,000 people. The company has over 20,000 retail sales points through which it sells fuel.

Published by Globes, Israel business news - - on March 29, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

Leviathan platform  credit: PR
Leviathan platform credit: PR
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