12° Nicosia,
20 May, 2024

BP and ADNOC's bold bid for the Leviathan field

As the UK and UAE eye a 50% stake, experts debate its impact on Cyprus and beyond

by Yiannis Ioannou

Last Tuesday, British multinational oil giant BP and Emirati Abu Dhabi National Oil (Adnoc, the UAE's state oil company) announced a joint bid to buy 50% of Israel's NewMed Energy in a $2 billion deal. NewMed Energy, formerly known as Delek, is a partner in the Leviathan field in Israel's EEZ, owning 45.33% of the massive offshore field discovered in 2010 and estimated to hold 22 trillion cubic feet of natural gas. (22 tcf). The Leviathan field (co-operated by Chevron) has been committed to exporting under an Israeli legal framework and, as of 2019, exports 12 bcm (billion cubic meters) of gas per year to Egypt and Jordan.

Based on reports from international financial publications specializing in the energy sector and the Israeli media, news of the BP-Adnoc offer resulted in a spectacular rise in NewMed Energy's share price (up to 30%) on the Israeli stock exchange last Tuesday. NewMed, formerly Delek, is owned by Yitzhak Tshuva, a powerful Israeli tycoon who has been playing a key role in developments in the Eastern Mediterranean gas market, particularly in Israel's export plans for energy fields in its EEZ, and who was also involved in a case with the country's antitrust authority over Delek's rights to the 'Tamar,' 'Karish,' and 'Tanin' fields since 2015.Map depicting the Eastern Mediterranean deposits ('Zor,' 'Leviathan,' etc.) and potential export routes. Recently, Israel and Lebanon reached an agreement in the disputed area between their maritime zones. The big picture of "Leviathan" over the Israeli EEZ is now potentially joined by the British giant BP and the UAE's state-owned oil company. Source: TEKM Ω R

The big picture

For the acquisition, BP and Adnoc intend to form a joint venture that will "focus on gas development in international areas of mutual interest, including the Eastern Mediterranean." Indeed, the CEO of Israel's NewMed Energy, Yossi Abu, praised the British-Emirati bid in Israeli media, as did Israel's Energy Minister, Israel Katz.

The big picture takeover bid for Leviathan by BP-Adnoc, estimated at $2 billion, has huge geopolitical implications and is linked to the "Abraham Accords" framework, which led to the normalization of Israel-UAE relations in 2020. Indeed, as part of the "Abraham agreements," Delek (now NewMed) sold 22% of the Tamar field to the Emirati state-owned Mubadala Petroleum in 2021, while Israeli NewMed Energy was also active in exporting gas to the Kingdom of Maghreb.

The pattern of US-assisted 'Abraham deals' appears to extend primarily to the energy sector (along with intelligence, cyber security, and export trade), with this sector serving as the main point of deepening relations between Israel and the UAE, with a geopolitical footprint spanning the entire MENA and Eastern Mediterranean subsystems.

Cyprus's Prospects

The acquisition of a portion of Leviathan by BP and state-owned Emirati Adnoc appears to be reshaping the deck of cards for Eastern Mediterranean gas exports, particularly in light of the ongoing conflict in Ukraine and how the region's fields could contribute to Europe's and the region's energy security. Inevitably, and regardless of the options for export from the Leviathan (pipelines, LNG, FLNG), Block 12 ("Aphrodite") on the Cypriot EEZ is also affected due to a. NewMed Energy's presence in the consortium of "12" and b. the long-pending dispute over Israel's claim to "Aphrodite" from the RoC - due to the adjacent "Ishai" field.

The trends identified in this analysis distinguish three axes that may be of concern to the RoC in the long run if Leviathan eventually transfers a 50% stake to the BP-Emiratians consortium:

  • The reestablishment of Turkey as a major buyer of gas originating from the Eastern Mediterranean. Turkey, one of the largest markets in the region, could be re-established as a potential buyer of gas from the Israeli Leviathan field or as an intermediate hub for transporting volumes to Europe. Recent developments in relation to the normalization of Ankara's diplomatic relations with Israel and the UAE point in this direction, as does the apparent full restoration of Turkey-Egypt relations - due to the key role played by energy security and interconnection with Cairo for Israel.
  • The further postponement of commercial exploitation of the Aphrodite deposits, particularly the start of production for export or internal consumption in Cyprus
  • The reintroduction of the 2014-2018 scenario for a direct connection between Leviathan and Turkey via the construction of a gas pipeline, would, in this case, bypass Cyprus.

[This article was translated from its Greek original]

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