Woodside Frustrated by Israel's lack of Responsiveness

While Israel was awaiting for its High Court of Justice’s ruling, all eyes were on the Australian giant, Woodside. A non binding deal that was penned earlier in February 2013 and according to which Woodside would buy a 30% stake in Israel’s Leviathan for a sum of $2.3 million remained pending Israel’s final decision. Export quotas and the extent of the cabinet’s prerogative in solely taking a decision that would commit the country for decades to come were debated by the Supreme court’s panel. The court finally reached a 5-2 vote in favor of a 40% export, confirming the Israeli cabinet’s June decision and rejected the petition filed by four members of the Knesset and four environmental and social policy groups.

The ruling came as a relief to the investors involved in Israel’s exploration activities, to politicians keen to monetize the country’s riches and invest the monies in further exploration activities, infrastructure, health, education and security projects and to Woodside who saw the green light to exports as a possible green light to the Israeli-Australian deal. Too fast? Maybe. The high court’s decision surely confirmed that exports will happen. The decision did not however touch upon export routes.

Woodside’s involvement in Israel’s entry to the gas market as a net energy exporter depends on the latter choosing the LNG option. Plans of building pipelines to Europe via Turkey and as a starting point to the Palestinian authority and potentially Egypt and Jordan were also discussed as possible export destinations. Opting for a pipeline does not automatically dismiss the possibility of also using Woodside’s expertise to eventually build an LNG plant, true. Remains however the prospect of Israel choosing to pool costs and efforts with neighbouring Cyprus and using the island’s LNG plant in the industrial area of Vassilikos on the Cypriot coast. Despite an announcement by Noble Energy that the quantities of natural gas in the Aphrodite field of Cyprus’ Block 12 were less than initial estimates suggested, the country is determined to move ahead with its multi-billion project. Total, Eni and Kogas will also be undertaking exploration activities off Cyprus’ shores and may join in the project should their efforts prove successful.

Woodside fears that Israel choosing other options will prevent the Israeli-Australian deal from coming to fruition. Woodside’s senior representatives were said to be complaining to government officials about Delek Group’s - Delek is an Israeli company owning a 45% stake in the Leviathan - lack of responsiveness, according to Israel’s Globes newspaper. It would make sense if Israel decided to opt for first step measures such a exporting small quantities of its natural gas to immediate neighbours - such exports would be booked as sales and would come out of the export allocations - before deciding how best to proceed to reach European and eventually Asian markets. Israel’s new found riches mean a lot to a country that not only has the ambition of becoming a major energy player but that also suffered to reach energy security after years of energy vulnerability depending on Egyptian gas imports and suffering from disruptions whenever the pipeline connecting the two countries was attacked. It is no surprise that every decision is carefully studied, debated and weighed before it is made. Woodside might have to hang on a little longer.