Adnoc-BP Team For East Med Gas Bid

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Abu Dhabi National Oil Co. (Adnoc) and BP are joining forces with an offer to acquire 50% of Israel’s offshore natural gas producer NewMed Energy through a new global gas joint venture (JV). 

The potential acquisition shows Adnoc advancing its goal of boosting gas production outside the United Arab Emirates (UAE’s) borders, while expanding its growing relationship with BP.

Under the terms of the offer, the Adnoc-BP JV would acquire 45% of the free float of NewMed Energy and another 5% of Delek Group’s stake, for a total of 50% of NewMed, according to an Adnoc statement Tuesday.

The offer price of 12.05 shekels ($3.40) per share represents a more than 70% premium to NewMed’s previous closing share price and puts the value of the offer at around $2 billion.

NewMed is the largest stakeholder in the giant Leviathan offshore field, operated by Chevron. The acquisition would give Adnoc and BP access to gas assets in both Israel and Cyprus.

Assuming the deal is concluded, NewMed would be 50% owned by the BP-Adnoc venture, with the remaining 50% held by Delek.

The proposed deal shows growing interest in the Eastern Mediterranean’s gas sector by both Western oil companies and national oil companies from the region.

It would also deepen the economic relationship between the UAE and Israel, following the normalization of diplomatic relations in 2020.

Last year, Abu Dhabi's Mubadala Petroleum acquired 22% in the East Mediterranean’s Tamar gas field from NewMed. That field holds around 11 trillion cubic feet of producible gas.

As such, Adnoc’s move would give the UAE access to two major Israeli gas fields.

But the deal also comes at a sensitive time amid renewed Israeli-Palestinian tensions. The UAE this week issued a public statement condemning Israel's decision to resettle areas of the occupied West Bank.

Adnoc’s Gas Ambitions

The NewMed offer is the first step by a proposed JV between Adnoc and BP that would focus on gas development in international areas including the East Mediterranean. “This proposed transaction with NewMed Energy would be a significant first step in establishing this dynamic JV,” Adnoc said.

The venture would “be focused on gas development in international areas of mutual interest” globally, the two companies said in a release announcing the NewMed offer.

The NewMed offer marks Adnoc’s first international gas deal, but industry sources expect more to follow.

Energy Intelligence understands that Adnoc has for years wanted to expand its gas production beyond the UAE. Despite a global search for opportunities, plans have not materialized until now.

With an eye on growing demand for gas as a “transition” fuel, Adnoc recently established a new integrated gas unit and listed part of that company.

The latest agreement also represents a broadening of the energy relationship between the UAE and the UK. BP in 2021 formed a strategic partnership with Adnoc and UAE renewables giant Masdar to work together on hydrogen hubs and decarbonization in both countries, including the potential to develop 2 gigawatts of hydrogen produced with electrolyzers powered by renewable energy.

BP’s Satellite Strategy

The NewMed acquisition would also mark an expansion of BP’s focus on JVs in its upstream strategy.

The UK major has increasingly hived off portions of its upstream portfolio and grown them through JVs and other deals.

Its initial step came with the formation of publicly traded Aker BP in 2016. It has since formed a JV with Eni off Angola known as Azule Energy and has explored a similar separation of its Iraq operations.

Company executives have argued that this allows BP to more nimbly manage distinct portfolios of E&P assets and opens up additional funding opportunities to operate them.

M&A, Corporate Strategy , Equity and Debt Markets, Majors, NOCs
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