UAE wealth fund eyes $1BN gas deal as ties with Israel deepen

The United Arab Emirates’ Mubadala Investment Co, a sovereign wealth fund with $232bn in assets, plans to buy a stake in an Israeli natural gas field for $1.1bn – a deal that would rank as the biggest since the Abraham Accords were signed last year.

The announcement of a possible gas deal between the UAE and an Israeli firm comes amid a boom in gas investments in the Eastern Mediterranean [File: Photo by Albatross via Getty Images via Bloomberg]

A United Arab Emirates sovereign wealth fund plans to buy a stake in an Israeli natural-gas field for as much as $1.1 billion, in what would be the biggest business deal since the nations normalized ties last year.

Abu Dhabi’s Mubadala Investment Co., a fund with $232 billion of assets, signed a memorandum of understanding to buy Delek Drilling LP’s 22% stake in the Tamar offshore field. Mubadala is carrying out due diligence, according to a person familiar with the matter.

“If finalized, the transaction will be the largest commercial agreement” since the signing of the Abraham Accords, Delek said in a statement.

The company’s shares rose as much as 9.1% on Monday in Tel Aviv, before paring gains to 2.7%. Delek would use most of the proceeds to pay down debt, according to the same person.


Historic Deal

Israel and the UAE’s deal in August was a historic breakthrough hailed by leaders including then-U.S. President Donald Trump as a crucial step toward forging peace in the Middle East. The UAE was the first Arab nation after Egypt and Jordan to recognize Israel.

Israeli Prime Minister Benjamin Netanyahu promised it would lead to billions of dollars of investment in his country. Bahrain, Morocco and Sudan have since then also normalized ties with Israel, following intense diplomacy from Netanyahu and Trump.

The UAE, of which Abu Dhabi is the capital, and Israel have agreed to develop anti-drone systems, artificial intelligence and big data analysis together as bi-lateral ties expand.

There have also been talks between businesses in the two countries on everything from oil pipelines, to soccer clubs to financial payments.

The announcement comes amid a boom in gas investments in the eastern Mediterranean, with Turkey, Israel, Egypt and Cyprus all trying to develop fields.

Gas can be “a source of collaboration in the region,” said Yossi Abu, Delek’s chief executive officer. “The development is not only a significant endorsement of the quality of the Tamar reservoir and the Levant basin but also a major support for the East Mediterranean natural gas sector.”

The Abu Dhabi fund would make the acquisition through its energy arm, Mubadala Petroleum.

The transaction would “strengthen our gas-biased portfolio in line with our energy transition targets,” Mubadala Petroleum said in a statement.

Tamar is Israel’s biggest field after Leviathan and located around 90 kilometers (56 miles) from the coastal city of Haifa. It supplies gas to Israel, Jordan and Egypt.

Chevron Stake

Israel is in talks to build a new subsea pipeline to Egypt, which aims to become a major exporter of liquefied natural gas to Europe.

Chevron Corp. operates Tamar and has a 25% stake. Other owners include Houston-based Isramco Inc. and Tamar Petroleum Ltd., based in Tel Aviv.

Delek has been key to the development of many of Israel’s gas finds along with Noble Energy Inc., which Chevron bought last year. The companies wanted to expand their footprint and explore Block 72, one of Israel’s northern-most offshore concessions. But the bid was blocked by Israel’s competition authority, which wanted to limit Delek’s already formidable share in the gas sector.

Israel’s government obliged Delek to sell all of its holdings in Tamar by the end of 2021.

(Updates with comments on transaction.)
–With assistance from Sylvia Westall.

Source: Bloomberg