The Chevron Corporation has announced an agreement to acquire Noble Energy for $5 billion in stock.
The deal includes Noble’s stake in Israeli offshore natural gas fields, meaning Chevron will now become the operator of the Leviathan and Tamar gas fields in the Mediterranean. Chevron will also acquire Noble's 35 per cent stake in Cyprus’s Aphrodite gas field. This is the first time a major oil company has entered the Israeli energy market.
Israel’s Energy Minister Yuval Steinitz said the deal represents a “tremendous expression of confidence in the Israeli energy market and the continued development and export of natural gas from the State of Israel.
US Energy Secretary Dan Brouillette tweeted: “The US-Israeli energy relationship remains stronger than ever. This administration strongly supports the development of Eastern Mediterranean gas resources, and we look forward to what American ingenuity can do to boost energy development and security in the region.”
Chevron CEO Mike Wirth told Reuters that the company was “mindful of the fact that there are political differences and tensions” between Israel and its neighbours, where Chevron also does business, thought emphasised that it is “apolitical” and “a commercial actor”. Chevron has recently acquired drilling rights in western Egypt and the Red Sea, and already operates in Saudi Arabia, Kuwait, Qatar and the Kurdish region of Iraq.
Context: According to Israel’s financial newspaper Globes, “Chevron's decision to buy Noble Energy is also a result of the significant change in Israel's status in the region in recent years and its relations with Gulf states”.
A market source told the paper: "The tensions with Iran don't only impact Israel but also our neighbours like the Gulf states and Israel has successfully positioned itself on the site of the Arab states. There is no doubt that a huge corporation like Chevron took that into consideration. If there had not been these regional changes, it is difficult to believe that a deal like this could have taken shape."
At the beginning of the week the Israeli government approved an agreement with European countries for the construction of a pipeline under the sea that would supply Europe with natural gas from the eastern Mediterranean. The pipeline will transport the offshore natural gas from Israel and Cyprus to Greece and on to Italy, which still needs to approve the project. Minister Steinitz said: "The government approval of the framework agreement for laying the Israel-Europe natural gas pipeline is another historic milestone for making Israel an energy exporter. This move will bring in tens of billions of dollars for Israel, which will benefit the state and the public in years to come."
The East Mediterranean arena is increasingly becoming engulfed in regional tensions. Last year Turkey and Libya agreed to adjoin their exclusive economic zones (EEZs), in what was perceived as an attempt to deter construction of the pipeline. Although such lines can be built through the EEZs of third countries, permission would need to be obtained first. Meanwhile Egypt, the dominant player in Mediterranean in terms of energy reserves, is on opposing side to Turkey over the crisis in Libya, complicating efforts for energy agreements in the Mediterranean.
Looking ahead: Minister Steinitz told the Times of Israel that he will "examine the request for the transfer of ownership of the rights to the fields once it is submitted to the ministry. By Israeli law, the rights to energy fields cannot be transferred without approval of Israel’s petroleum council.”
The deal is viewed as an important long-term investment for Chevron as Israel natural gas fields are the largest in the eastern Mediterranean. The deal could help Chevron reduce their carbon footprint as gas is seen as a cleaner alternative.
According to Reuters, the pipeline is expected to be completed by 2025 and will help Europe diversify its energy resources. The pipeline is planned to initially carry 10 billion cubic meters of gas a year with the possibility of eventually doubling the capacity. A land and sea survey is currently underway to determine the route of the 1,900-kilometer pipeline.