British multinational oil and gas firm BP plc and Abu Dhabi National Oil Co. (Adnoc) on Tuesday announced a joint bid to buy 50% of Israel’s NewMed Energy in a deal valued at about $2 billion.
As part of the non-binding offer, the two energy firms will buy 45% of the free floating shares the public holds in NewMed Energy, formerly Delek Drilling (part of Yitzhak Tshuva’s Delek Group), and about 5% of Delek Group’s stake to take the Israeli offshore natural gas producer private. Shares in NewMed jumped almost 30% in early afternoon trading in Tel Aviv.
The deal would give BP and Adnoc, the United Arab Emirates state-owned oil company, a foothold in Israel’s offshore natural gas fields and its growing energy export markets to pursue projects in eastern Mediterranean.
BP and Adnoc said they plan to form a joint venture for the purpose of the deal, which will be “focused on gas development in international areas of mutual interest including the East Mediterranean.”
The offer is another sign of the warming ties between the UAE and Israel after the two countries signed a normalization agreement in 2020 as part of the US-backed Abraham Accords. Back in 2021, Delek Drilling sold its 22% stake in Israel’s Tamar offshore gas field in the east Mediterranean to Abu Dhabi government-owned Mubadala Petroleum for about $1 billion.
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NewMed is a key holder, with a 45% stake, in Israel’s Leviathan gas field off the Mediterranean coast, which contains an estimated 22 trillion cubic feet of gas, and was involved in the development of the Tamar, Karish, and Tanin natural gas fields.
NewMed Energy CEO Yossi Abu. (Inbal Marmari/Courtesy)
Israel’s natural gas discoveries and operations in recent years have put the country on a path to energy independence and turned it into a gas exporter, while largely shielding it from the worst of the energy crisis sparked by the Russian war on Ukraine this year, in a region with few natural resources.
Currently, a maximum capacity of 12 billion cubic meters per year is piped up from the Leviathan reservoir for the supply and sale of gas to Israel, Egypt, and Jordan. In recent weeks, partners in the Leviathan gas field operated by US energy giant Chevron announced the exploration of plans for a floating liquefied natural gas (LNG) terminal off the Israeli coast and a third subsea transmission pipeline to boost gas production and enable exports to Europe and Asia.
NewMed CEO Yossi Abu hailed the BP-Adnoc deal as a springboard to “catapult NewMed Energy from the regional to the global stage.”
“The offer we received is the result of the warm relationships and bridges we have built in recent years with the energy companies working in the region, and is an important vote of confidence – the most significant given to the Israeli gas market in general, and to the business and assets of NewMed Energy in particular,” Abu said.
Under the terms of the offer, the BP-Adnoc venture will pay NIS 12.05 for each purchased share, representing a premium of about 72% to NewMed’s closing price in Tel Aviv on March 26, giving it a company valuation of NIS 14.1 billion ($4 billion). Should the deal be approved, NewMed will become a private corporation equally held by the BP-ADNOC venture and the Delek Group.
Israel’s Energy and Infrastructure Minister Israel Katz welcomed the deal offer, which he called “a testament to the potential and attractiveness of Israel’s natural gas industry to the world” and “the strength of relations and trust between Israel and the UAE.”
From left: Delek Drilling CEO Yossi Abu with Dr. Bakheet Al Katheeri, Executive Director – UAE Industries, Mubadala Investment Company, and Mansoor Mohamed Al Hamed, CEO, Mubadala Petroleum (both on screen), in September 2021. (Refi Daloya)
Katz added that approval of the deal is subject to the examination of the ministry and professional authorities once its details are presented to his office.
Delek Drilling, alongside various partners, led the discovery and development of Israel’s Leviathan, Tamar, Karish, and Tanin natural gas fields off the Mediterranean coast. Under a controversial natural gas framework agreement in 2015, the Israeli government required Delek to sell its holdings in Tamar, Karish, and Tanin to break its monopoly and that of its partners.
The company sold all its stakes in Karish and Tanin in 2016 to London-headquartered Greek company Energean. Post-sale, Delek Drilling, which re-branded as NewMed Energy in February last year, has sought to explore new export markets, and has been pondering the entry into the fields of alternative energy (such as hydrogen and carbon capture) and renewable energy.
Commenting on the latest offer, BP said in a statement that “when completed, this would strengthen the broader strategic partnership between Adnoc and BP across oil and gas, hydrogen and carbon capture and storage technology and would deepen the partners’ long-standing relationship.”
At the end of last year, NewMed inked a deal with Morocco and Adarco Energy for offshore natural gas exploration and production licenses in the North African kingdom, after Morocco normalized ties with Israel in 2020 as part of the Abraham Accords.
In August, NewMed partnered with Israel’s Enlight Energy to promote renewable energy projects in the Middle East and North Africa, including countries with which Israel does not have formal diplomatic ties.