PERTH (miningweekly.com) – Australian petroleum miner Woodside has signed a memorandum of understanding (MoU) with the joint venture (JV) participants of the Leviathan project to negotiate a 25% shareholding in the project.

The MoU was converted from a previous in-principle agreement for the potential acquisition of a stake in the Israeli project, which has an estimated 2C contingent resource of 18.9-trillion cubic feet of natural gas and 34.1-million barrels of condensate.

Consistent with the previous in-principle agreement, Woodside would still act as operator of any liquefied natural gas (LNG) developments of the field, while JV partner Noble Energy would remain upstream operator.

The MoU contemplated the supply of domestic gas to Israel, LNG exports and supply to neighbouring countries.

Woodside would pay $850-million for its stake in the Leviathan project, with a further $350-million payable on a final investment decision for an LNG development, or payments of up to $350-million on predetermined export project milestones.

A payment of 5.75% of Woodside’s well head export gas revenue would also be required - starting after at least two-trillion cubic feet had been exported from the Leviathan field - and was capped at $1.3-billion.

Furthermore, a 2.5% royalty would be paid on commercial oil production from the deep prospect in the Mesozoic, based on wellhead value, and would be paid after payback of development costs. A further one-time payment of $50-million would also be made if after the production of four-trillion cubic feet (tcf), the gross gas resource is assessed by an independent expert to be at least 20 tcf.

Woodside CEO Peter Coleman said on Friday that the MoU provided a potential commercial outcome with compelling value for the company.

He noted that the transaction was subject to the execution of a fully-termed agreement and certain policy, tax and regulatory approvals from the Israeli government.

Besides Noble, the JV partners include Delek Drilling, Anver Oil Exploration and Ratio Oil Exploration.