Royal Dutch Shell is going to acquire BG Group for close to $70 billion, and the combined company will become the second-largest publicly-traded Energy and Petroleum (E&P) company in the world by production and the largest by sheer size of cash stash. That’s good news — but Eco Energy CEO Amit Mor is warning the new deal is likely to jeopardize a deal for exporting natural gas BG signed with the partners in the Leviathan natural gas reservoir.
“The geopolitical considerations of a giant company like Shell are different than those of BG, ” Mor told Globes, suggesting that an industry giant like Royal Shell would be concerned about its future business with Iran, which is why, Mor said, “I’m not sure how much Royal Shell will want to be linked with Israel.”
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A letter of intent was signed in the summer by the Leviathan partners and BG, to supply 105 billion cubic meters (BCM) of gas, at an estimated $30 billion, to the BG liquefaction facility in Idku, Egypt over 15 years, Globes noted.
They have yet to sign the final contract, but the Leviathan partners have been counting on this money to be able to invest in further development of the site.
Last May, Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, scrapped an agreement to buy a quarter of Leviathan’s yield for something like $2.6 billion, after talks to complete the deal collapsed. It was presumed back then that the Israeli deal would have ended up costing Woodside too much to be able to make a significant profit.
Former Israel National Gas Authority chief economist Miki Korner told Globes: “It’s important to keep in mind that Shell owned 20% of the shares in Woodside, and Woodside does not have good memories from Israel.”
When Royal Shell announced which parts of the world it was eyeing for development projects, it mentioned Brazil, Australia, North America, East and West Africa, and the North Sea.
Notice a particularly rich part of the planet they failed to mention? Well, Korner hopes this doesn’t necessarily mean the end of the Leviathan deal with BG: “I want to believe that the acquisition of BG will not affect the deal with Leviathan, ” Korner told Globes
Stil, analysts have been urging Israel to make the effort to create a stable regulatory environment “if it wants the deal with Leviathan to go through, ” as senior energy analyst Amir Foster put it.
Sooner or later, the Egyptian deal will make sense to Shell, and when it does, they’d better find an Israeli government bureaucracy ready and able to deal.
