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Woodside reconsidering Leviathan investment with other expansion options


PERTH (Bloomberg) -- Woodside Petroleum expects to decide in the first half of 2014 whether to complete a deal to invest in Israel’s Leviathan venture. Woodside has expansion options beyond Leviathan, Chief Executive Officer Peter Coleman told analysts and reporters on a call after the Perth-based company provided its 2014 outlook. Woodside remains in talks with the Leviathan partners, including Noble Energy, to bring the transaction to a close, he said.

Woodside’s purchase of a stake in Israel’s largest gas field has faced delays because of uncertainty over the nation’s export policy and discussion by the partners about alternatives to building a liquefied natural gas development. The Australian company targeted LNG exports from Israel when it agreed a year ago to pay as much as $2.3 billion to the companies.

“There’s still an opportunity for Woodside to create significant value within the joint venture,” Coleman said. “But I can assure shareholders we are focused on ensuring we have a commercial outcome that delivers value. It needs to be a compelling value case given the amount of investment that would be involved and the significance of the decision.”

Woodside lowered its 2013 spending estimate to $1.1 billion from its previous expectation of $2.3 billion, mainly because of deferred investment in Leviathan.

Sending the gas by pipeline to countries in the region may generate bigger returns for the partners than building an LNG plant, John Hirjee and Hugh Morgan, Melbourne-based energy analysts at Deutsche Bank AG, wrote in a Dec. 6 report.

“We expect Woodside’s ability to consummate a binding deal for Leviathan on accretive terms will be a key near-term driver, and see the possibility that Woodside could exit the JV,” the analysts said. The value of Leviathan has increased with the potential to pipe gas to regional customers at lower cost, Noble CEO Charles Davidson told analysts last month, according to a transcript.



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