Woodside Petroleum Ltd. (ASX: WPL) CEO Peter Coleman is flying out to Israel for a lightning visit to discuss the natural gas export taxation issue. During his visit tomorrow (Wednesday) he will meet senior officials at the Prime Minister's Office and other ministries. A committee headed by Ministry of Finance director general Yael Andorn is this week due to submit recommendations on the topic of taxation for natural gas exports to Prime Minister Benjamin Netanyahu.
As revealed by "Globes," the Ministry of Finance is expected to recommend a higher taxation rate on gas exports than the Australian company is seeking. Woodside has warned that the issue could scupper the talks for it to buy a 25% stake in the Leviathan field for $2.71 billion. The deal is supposed to be signed on March 27 at a ceremony in Jerusalem.
The imminent recommendations on taxation will fill the vacuum left by the Sheshinski Committee, which did not discuss the matter in detail but merely said that tax on surplus profits would be between 20-50%, according to a "transfer price" that reflected the domestic price for natural gas. The Andorn Committee was appointed by the government last July to consider tax on exports, so that the minister of finance could recommend rules for taxing gas exports to the government.
Some of the Leviathan gas will be exported to Asia through long-term contracts and via Floating Liquid Natural Gas (FLNG) installations. Woodside is a leading specialist in FLNG projects.
"Globes" recently reported that Woodside presented its position to Minister of Finance Yair Lapid that the taxation on a FLNG project like Leviathan should reflect returns of 17-19%. The Ministry of Finance recommends a possible ceiling of returns on taxation of 17% and a floor of 5-6%. The Ministry of Finance insists that a midstream FLNG venture should reflect returns at a relatively low risk.
Published by Globes [online], Israel business news - www.globes-online.com - on March 11, 2014
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