Woodside Keen On Leviathan Partnership, Pelagic Prepares Aphrodite-2 Well

Woodside Keen On Leviathan Partnership, Pelagic Prepares Aphrodite-2 Well

Despite Israel�s two most recent wells being dry holes, the country�s offshore exploration work continues to move forward. Australia�s Woodside Petroleum, skilled in the LNG industry, has bid for a strategic stake in the Leviathan gas field, while the Pelagic group will this week start its own drilling in the Aphrodite field.

Australia�s Woodside Petroleum has made a bid to become a strategic partner in Israel�s offshore Leviathan gas field, where resources are estimated at 17 tcf (480 bcm). Woodside�s offer for a 30% stake in Leviathan �reflects a value of $7.5bn, compared with analysts� estimates of $4.7-5.5bn for the gas field,� Israel�s Globes commented, but added that the bid is subject to a number of conditions that could lower the final offer. Leviathan partners are taking the bid under review and a partner could be selected within weeks.

The partners in the Leviathan field � US firm Noble Energy, Delek Group subsidiaries and Ratio Oil Exploration � have expressed their interest in developing Leviathan for LNG export � possibly through an LNG facility located in Cyprus � but will need a strategic partner experienced in LNG to carry the project through. Currently, the target date for Leviathan production start-up is a tentative 2017. But exports from Leviathan and other Israeli fields will depend on whether the Israeli government�s export policy follows the recommendations put forward by the Zemach Committee earlier this year. They insist that the lion�s share of Israeli gas be held in reserve but allow for as much as 75% of Leviathan gas reserves to be available for export, and also leave open the possibility that Israeli hydrocarbons could be exported via other countries, such as Cyprus, if a suitable export site in Israel cannot be found.

For its part, Woodside has considerable experience with LNG through several projects in its native Australia. It is operator of the North West Shelf project facilities, which include a 5-train LNG plant with a 16.3mn tons/year capacity along with LPG and condensate export facilities, and is involved in the Pluto LNG, Browse LNG and Sunrise LNG projects, all located off the western/northwestern coasts of Australia. The firm holds production assets in the Gulf of Mexico and exploration acreage in the US, Korea, Brazil and Peru. Once active in Africa, it has divested its interests in Mauritania, Libya, Algeria, Sierra Leone and Liberia. Through its Australian LNG operations, Woodside has well established contacts in Far Eastern LNG markets, where demand for gas has been strong.

Woodside participated with Delek and Italy�s Edison and Enel in a consortium that bid for Block 9 in the second Cyprus offshore licensing round, which closed in May. The licenses are expected to be awarded before the end of October and contracts are to be negotiated and concluded during the first half of 2013. Noble holds a 70% interest in Cyprus Block 12, where it discovered 7 tcf (198 bcm) of gas in December 2011. MEES understands that the Cypriot government on 23 October approved a transfer of 30% of Block 12 interest to the Delek Group subsidiaries, Delek Drilling and Avner Oil & Gas.

In recent months, the Cypriot government has revealed plans to proceed with an LNG facility on the island to monetize Block 12 gas, regardless of Israeli participation. Talks between Noble and the Cyprus government on the development of Block 12 are expected to conclude before year end.

Woodside CEO Peter Coleman met with Israeli Prime Minister Benjamin Netanyahu on 22 October, along with Israeli Minister of Energy and Water Uzi Landau. Mr Coleman was accompanied by two Woodside executives and Australia�s ambassador to Israel, Globes reported. The group discussed all aspects of Leviathan development, including plans by Noble to next year deepen the Leviathan-1 well to some 7,200 ms in search of oil. �The natural gas is a strategic asset for the future of the State of Israel,� Mr Netanyahu said later.

It was reported in mid-October that Russia�s Gazprom had made the highest offer for a 30% share of Leviathan, but it is known that Noble prefers a Western partner. Some of the Western companies with LNG experience reported to be eying Leviathan have interests in the Gulf, which could make partnerships involving Israel politically difficult. Woodside is basically free of those complications. Partner shareholdings in Leviathan are: Noble Energy (39.66%), Delek Drilling (22.67%), Avner Oil & Gas (22.67%), and Ratio Oil Exploration (15%).

Pelagic Ready For Aphrodite-2 Well

As MEES went to press Israel�s Pelagic consortium was preparing to start drilling what it has named the Aphrodite-2 well, located in the Ishai license offshore Israel, which borders Cyprus� Block 12, where the bulk of the Aphrodite structure is located (MEES, 19 October). Pelagic sources told MEES that the group expects to take possession of the Homer Ferrington rig and move it in place on 26-28 October at a location that will be 683ms from the maritime delimitation line between Cyprus and Israel. Target depth for Aphrodite-2 is 6,000ms in 1,700ms of water. Noble Energy used the Ferrington rig to drill the Cyprus A-1 (Aphrodite-1) well in Block 12. Aphrodite-2 will take an estimated 87 days to complete. Noble intends to start appraisal drilling in Block 12 in 2013, pending an agreement with the Cypriot government on the block�s development.

The Pelagic consortium is comprised of Genesis Energy (33.5%) and Daden Investments (9%), Nammax (42.5%), Israel Opportunities (10%), and operator Norway�s AGR Petroleum (5%). The group holds five licenses located along the delimitation line with Cyprus.

Dry Sara Well Echoes Myra Disappointment

Partners in Israel�s offshore Sara license reported on 21 October that the Sara-1 well proved to be a dry hole and that it would be plugged and abandoned. It was the second stroke of bad luck for the partners, who in September acknowledged that the Myra-1 well in the neighboring Myra license also came up dry. �There is no doubt that this is a great disappointment for the partners, investors and the Israeli economy as a whole,� key Modiin Energy shareholder Tzahi Sultan was quoted in the Israeli press as saying. �Regrettably a dry hole is part of the risk of exploratory operations.�

Partners in the Sara and Myra licenses include: Modiin Energy (29.1%), IDB Development (5.6%), ILDC Energy (41.6%) Israel Land Development Company (5%), IPC (13.6%) and Canada�s GeoGlobal Resources (5%). Investment in the Sara-1 well amounted to $48.5mn, plus $7mn to plug and abandon the well. The Myra well cost an estimated $100mn. The announcement that Sara was a dry hole resulted in the share price of Israel Land Development falling by 67% on the Tel Aviv Stock Exchange (TASE) and Modiin Energy falling by 46%.

Copyright MEES 2012.