BP, ADNOC offer to buy 50% of Israel’s NewMed Energy

BP and Abu Dhabi’s state oil giant on March 28 offered to jointly acquire 50% of Israeli offshore natural gas producer NewMed Energy for around $2 billion, making their entry into Israel’s growing energy sector.

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Abu Dhabi National Oil Co (ADNOC) and BP said they intend to form a new joint venture as part of the deal that will be “focused on gas development in international areas of mutual interest including the East Mediterranean.”

The gas-rich offshore basin straddling Egypt, Israel, Cyprus and Lebanon has drawn some the world’s top energy companies in recent years, particularly as Europe scrambles to secure supplies to replace Russian gas in the wake of Moscow’s invasion of Ukraine.

BP shares gained 2.5% by 1430 GMT while NewMed shares were up around 37%.

NewMed is the largest stakeholder in the giant Leviathan offshore field, operated by Chevron which produces 12 billion cubic meters (bcm) of gas that are supplied to Israel, Egypt and Jordan.

NewMed and its partners plan to nearly double Leviathan’s production to 21 to 24 bcm by 2027 are also exploring plans for a liquefied natural gas (LNG) terminal to further boost exports, Chief Executive Officer Yossi Abu told Reuters.

“This is a sign of confidence in the East Med becoming a major supplier of gas to Europe,” Abu said.

The offer is a further sign of the strengthening economic links between Israel and the United Arab Emirates since the two countries agreed to normalize ties in 2020.

Last year, Abu Dhabi’s Mubadala Petroleum acquired from Delek Drilling a 22% stake in the east Mediterranean Tamar gas field for about $1 billion.

For BP, the deal highlights the British company’s focus on growing natural gas production after Chief Executive Bernard Looney last month slowed down its shift away from fossil fuels. BP already has large gas operations in Egypt.

Under the non-binding offer, BP and ADNOC would buy 45% of NewMed’s free floating shares and an additional 5% owned by Israeli conglomerate Delek Group, which will hold the remaining 50%, taking the company private.

The cash offer price is 12.05 ILS ($3.38) per share, reflecting a 72% premium above the pre-deal market price, valuing the entire company at about 14.1 billion ILS, or $3.96 billion.

After the deal closes NewMed will become a private corporation equally held by the BP-ADNOC JV and Delek Group, which holds the remaining 50%.