* 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 (Reuters) - 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 analyst said.
“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)