* Last-minute snag on export taxation - analyst
* Woodside looks to resolve issues and sign deal
* Partners target first production in 2017-2018
(Adds analyst comments)
By Sonali Paul and Ari Rabinovitch
MELBOURNE/JERUSALEM, March 28 Australia's
Woodside Petroleum Ltd has delayed signing a landmark
agreement to take up to a $2.7 billion stake in Israel's
Leviathan gas field, but said on Friday it was in talks to
overcome remaining issues.
The agreement was supposed to be signed on March 27, however
Woodside has been unwilling to sign until it is comfortable with
the Israeli government's plans for taxing export volumes, an
"Discussions continue with the parties and the Israeli
government with a view to resolving the remaining issues and
executing definitive agreements," Woodside said in a statement
to the Australian stock exchange.
The Israeli government this week outlined its preferred
regime for taxing the exports, but that didn't match the
assumptions Woodside had in its models for the project, UBS
analyst Nik Burns said.
"Ultimately it's about getting more comfort with the tax
treatment, particularly around gas export volumes. The rate of
return in the tax calculations for floating LNG seems to be the
major issue there," he said.
Woodside declined to comment on the hurdles to an agreement.
By bringing in Woodside, a liquefied natural gas (LNG)
specialist, the U.S.-Israeli group developing the project and
its 540 billion cubic meters (19 trillion cubic feet) of
reserves are looking to access a broad market, especially Asia.
Woodside tentatively agreed in February to take a 25 percent
stake in the project, owned by Texas-based Noble Energy,
and Avner Oil Exploration, Delek Drilling
and Ratio Oil Exploration.
The deal was first announced in December 2012 but the sides
held off on finalising it until Israeli regulations on exports
and taxation became clear.
While Woodside has said it would not go ahead with a deal
unless it makes sense commercially, analysts said the latest
delay was not necessarily a bad sign for the joint venture
partners after trying to seal a deal over the past 16 months.
"There seems to be some goodwill among all parties to make
it happen," Burns said.
Woodside shares rose 0.8 percent on Friday, outpacing a 0.4
percent gain in the broader market.
The Leviathan discovery in 2010, along with a sizeable find
a year earlier, came as a surprise for Israel, which has always
been dependent on fuel imports.
The government scrambled to update its policies to make sure
the domestic market remained a priority and the state received a
fair share of the revenues without upsetting the companies
involved by cutting too much into their profits.
Last June the government decided that 40 percent of the
country's total reserves could be exported.
There has been a lot of speculation on how Leviathan will be
developed and where the gas could be sold.
The Israeli partners have said that 16 billion cubic metres
of gas a year will be produced in the first stage, starting in
2017 or 2018, about half of which will be sent by pipeline to
Israel, Jordan and the Palestinian Authority. The rest will be
sold through a separate pipeline to another neighbor, perhaps
Turkey or Egypt.
At the same time, there are more complex plans for LNG
exports with an eye to serving Asian markets. The LNG exports
would be processed onshore at a facility in Cyprus or, more
likely, at sea on a floating LNG vessel.
(Editing by Richard Pullin)