The Australian Woodside Petroleum company signed a $2.5 billion deal to enter the Leviathan gas field in offshore Israel.
The owners of Leviathan were in Australia this week to try to finalize a year-old non-binding deal, worth up to $2.3 billion, The Australian daily reported.
Woodside will pay more than it had originally offered to enter the gas field because its owners want to pipe much of the gas to Turkey and other regional countries. Pipeline exports to Turkey require less development spending, which would increase the value of the gasfield.
Under the new memorandum of understanding, Woodside will take a 25 percent stake, down from 30 percent discussed in previous rounds of negotiation, the daily reported Thursday.
The terms of entry are $850 million up front and $350 million on a final investment decision.
After this, Woodside will pay up to $1.3 billion for a 5.75 percent royalty on well-head export gas revenue after at least 2 trillion cubic feet have been exported from the Leviathan field.
It will also pay a royalty of 2.5 percent on any commercial oil production from the deep prospect after development costs.
The deal is conditional on a fully-termed agreement and policy, tax and regulatory approvals from Israel.
The Leviathan field, located about 80 miles west of Haifa in northern Israel, has not yet begun gas production; it is scheduled to start in 2017. The partners are Avner Oil Exploration, Delek Drilling and Ratio Oil Exploration.
In June, Israel’s Cabinet approved the export of about 40 percent of the country’s recently discovered reserves of natural gas while keeping a 25-year supply for national consumption. The decision was upheld in October by the Israeli Supreme Court.
Several large natural gas fields have been discovered in the Mediterranean Sea off the coast of Israel in recent years. There are projected to be approximately 950 billion cubic meters of gas in the fields.