Monday, April 15, 2024

BP and Abu Dhabi National Oil Company Suspend $2 Billion Israel Gas Deal Amid Gaza Conflict

HomeWARBP and Abu Dhabi National Oil Company Suspend $2 Billion Israel Gas...

A major $2 billion energy investment in Israel has been suspended indefinitely as the escalating violence between Israeli forces and Palestinian militants in Gaza shows no signs of abating.

The British oil giant BP and the Abu Dhabi National Oil Company (Adnoc) have mutually agreed with the Israeli company NewMed Energy to put their discussions for a joint acquisition of a 50% stake in NewMed on hold, all three firms announced on Wednesday.

In a terse statement, NewMed said the deal was being “suspended” due to the “uncertainty created by the external environment” – an apparent reference to the ongoing bombardment of Gaza and retaliatory rocket attacks that have killed hundreds and drawn widespread condemnation.

However, NewMed added that BP and Adnoc have “reiterated their interest” in potentially reviving discussions on the “proposed transaction” at a later point, suggesting the deal is not entirely scuttled.

A BP spokesman confirmed the suspension but declined to comment further. Adnoc also did not provide any additional details when reached by The Times.

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The deal would have seen the two oil giants jointly acquire a $2 billion stake in NewMed, which owns 45.34% of the massive offshore Leviathan natural gas field in the Mediterranean near the Israeli coast. The reservoir is one of the world’s largest deepwater gas discoveries.

The proposed investment by the British and Emirati state energy firms was considered a significant milestone, coming just two years after the United Arab Emirates normalized diplomatic relations with Israel under the Abraham Accords brokered by the Trump administration in 2020.

However, the UAE has grown increasingly vocal in calling for an “immediate ceasefire” as the deadly Israeli military operation in Gaza drags on into its sixth month with no resolution in sight. The offensive began on October 7 after Hamas militants fired rockets into Israel.

The human toll, with hundreds of Palestinian civilians killed in Israeli airstrikes aimed at degrading Hamas’ military capabilities, has sparked widespread outrage and boycotts across the Arab world against Western companies perceived to have financial ties to Israel.

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Global brands like Starbucks, McDonald’s, KFC and Pizza Hut have faced boycott campaigns by consumers who view their business dealings as indirectly supporting Israel’s military campaign. Some of the boycott leaders have pointed to the proposed NewMed deal as another example of corporate investment in Israel they consider objectionable.

In the initial days after the conflict erupted, a BP executive expressed optimism the NewMed deal would proceed as planned, according to reports from Reuters. But as the fighting escalated with no end in sight, the environment clearly became too unstable for the two energy giants to move forward, at least for now.

NewMed’s shares fell as much as 7% on the Tel Aviv stock exchange Wednesday following the announcement that talks were being suspended.

Under the proposed deal’s terms, BP and Adnoc were set to acquire their 50% stake in NewMed by purchasing the company’s publicly traded shares as well as buying part of the equity stake held by Delek Group, an Israeli energy conglomerate.

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The other major stakeholder in the Leviathan gas field is the American oil supermajor Chevron, which holds 39.66% ownership.

While suspending the NewMed talks, BP has signaled its interest in maintaining a presence in the energy-rich Mediterranean remains undiminished. Just last October, it was one of six international firms awarded exploration licenses by Israel’s energy ministry for offshore natural gas drilling.

BP and Adnoc are also partnering on other gas projects in the region, including a joint venture announced just last month to develop natural gas assets in Egypt.

But the suspension of the high-profile Israel investment casts doubt over the immediate future of the deal and broader economic ties between Israel and Gulf monarchies like the UAE.

Whether the Gaza conflict will ultimately force the parties to scrap the transaction entirely remains uncertain, with no clear diplomatic resolution on the horizon as the bombardment continues unabated.

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Mezhar Alee
Mezhar Alee
Mezhar Alee is a prolific author who provides commentary and analysis on business, finance, politics, sports, and current events on his website Opportuneist. With over a decade of experience in journalism and blogging, Mezhar aims to deliver well-researched insights and thought-provoking perspectives on important local and global issues in society.

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