The $2.6 billion investment by Woodside Petroleum Ltd. (ASX: WPL) into the Leviathan natural gas field remains uncertain if Israeli tax issues stay unsolved by this month’s deal deadline, CEO Peter Coleman told "The Australian". If the tax issues, which are a condition of Woodside’s hard fought entry into the offshore gas field, are not agreed by March 27, any party could stop the deal going ahead, he added.
Woodside has agreed to pay $2.6 billion in stages to take a 25% stake in Leviathan and operate a planned floating LNG plant. This deal superseded a previous one where Woodside was to pay up to $2.3 billion to take a 30% stake. The reason for the turnaround was that during an extended Israeli export policy approval, which a December 2012 deal for Woodside to enter the project was contingent on, new regional pipeline options made the project more valuable.
“We are working with the Israeli government to get clarity around final taxation arrangements," said Coleman. Woodside cannot enter Leviathan on the new terms signed on February 7 with Noble Energy Inc. (NYSE: NBL) and Delek Group Ltd. (TASE: DLEKG) until a deal is reached with the Israeli government. "We may not get that before we need to sign up for the deal, so that is going to be a decision we have to make as we come towards March 27. We will have to see what signals we get from the government."
The Leviathan deal, which has the potential to increase Woodside’s resources by half, is conditional on “certain policy, tax and regulatory approvals from the Israeli government”. Coleman said the tax regime and treatment of capital gains tax for the sellers needed to be sorted out. “There is a conversation with us around transfer pricing, or the pricing you use to calculate the export sales. We’ve worked with them to show them how the Australian regime works and we’d be quite comfortable with that regime."
Woodside said in its financial statement in February that a floating LNG facility was the preferred option for Leviathan under an ambitious timetable of 2015 investment approval. While this speed of development will be tough, its aggressiveness should please the Israeli government and may provide some incentive for it to clear Woodside’s entry.
Published by Globes [online], Israel business news - www.globes-online.com - on March 2, 2014
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