Woodside Petroleum's $US1.3 billion investment in the huge Leviathan gas field may have struck a snag, with Israeli media speculating competition regulators are set to rule against its partners in the development.
Woodside announced in December it had paid $US696 million to Noble Energy for a 30 per cent stake in Leviathan, and would build and operate a liquefied natural gas plant in Israel, making further payments after milestones including export and final investment approvals.
Woodside has yet to make its initial payment but in the US on Wednesday, chief executive Peter Coleman was forced to respond to media reports that the head of the Israel Antitrust Authority would soon rule a cartel existed between Noble and its partners in the Leviathan field, including Delek Drilling.
The authority has previously found a cartel existed between Noble and the same partner in the Tamar field, and Israel's Haaretz newspaper said the Leviathan decision could shock the energy industry and potentially force the partners to sell the gas in the field separately or sell their holdings in the field to a third party.
Mr Coleman told reporters on the sidelines of an oil and gas conference in Houston that he was confident Woodside's deal with Noble would be finalised and said the regulator's reasoning "goes a little further than our understanding of what the law says".
On the ASX, Woodside's shares ended unchanged at $37.15.
An analyst said it would be a significant blow to Woodside's strategy - and to Mr Coleman's leadership - if the Leviathan deal unravelled, given it was a crucial new expansion project for the cashed-up company.
The analyst, who did not want to be named, questioned the rationale for an adverse ruling against Noble and its partners, saying "it's a bit harsh for the regulator to claim that these guys have a monopoly power because they were so successful with the drill bit".
"I've never ever heard of anything like this before ... does that mean ENI and Anadarko can be alleged to have monopoly power in the Mozambique gas market, because they made all the discoveries offshore? It's just confirmation of the risks that exist with big discoveries in new regions that haven't formulated policy ... Clearly Woodside cited that as a risk when they went in, and structured the deal ... From a valuation perspective, it's not enormous but from a strategic perspective it is absolutely key ... they don't have any near-term growth projects that have really got much traction. Leviathan was supposed to [solve] that.
"It would also drive a lot more caution in future deals ... if they get burnt here."