Oil & Gas 360 Publishers Note: This is part a larger issue going on in the Mediterranean. There are many countries trying to jockey for the lowest cost, and long term, acquisition of natural gas. This is causing some issues in territorial waters.
After taking over Noble Energy this week, Chevron will likely take its time in deciding what to do with the Aphrodite gas-field by Charles Ellinas
Chevron agreed this week to acquire Noble Energy, mostly because of its shale oil and gas assets in the US, at a bargain price of close to $5billion – about 40 per cent of the value of the company at the start of the year. It will be an all-stock deal, equivalent to about 3 per cent of Chevron’s market value.
But Chevron is also interested in Noble’s East Med natural gas assets, which, in addition to Tamar and Leviathan in Israel, also include the Aphrodite gas-field in Cyprus’ EEZ.
Chevron is the second largest US oil company, with global operations. The company is very keen to expand its US shale assets. Having failed to acquire Anadarko last year, that was the main driver behind this acquisition. Through this, it makes it possible for Chevron to expand shale presence in the oil-rich Permian Basin in Texas and the DJ Basin in Colorado, where it is targeting to maintain production of over 1million barrels/day through to 2040.
Given Noble’s debt, which Chevron inherits, the total cost of the deal is more than $13billion, but it is still a bargain. It still is a cost-effective opportunity for Chevron to acquire additional, low-cost, proved reserves and resources.
The benefit to the company is that Noble’s oil and gas profile fits well with Chevron’s, bringing with it international gas assets and rich, low-cost, shale assets, totaling about 2billion barrels of oil equivalent (boe). This constitutes a sizeable addition to the company’s 12billion boe reserves.
Chevron’s interest is not just in shale assets, but also in Noble’s East Med and Equatorial Guinea proven natural gas reserves. These help the company bring its emissions intensity factor down – emissions per boe – something that helps improve its ESG (environmental, social and governance) profile, a metric important to its investors.
But Chevron also has major oil and gas interests in Saudi Arabia, Iraq and Qatar. Last year it teamed up with QP to build an $8billion petrochemicals complex in Qatar, where it also wants to be part of the LNG expansion project. It remains to be seen how it can reconcile its newly acquired presence in Israel politically with these. When asked, Chevron’s CEO, Mike Wirth, said: “We are an honest broker, we are a commercial actor, not a political actor.”
Leaving aside the impact of Covid-19 in reducing gas production in Israel in 2020, both Tamar and Leviathan are highly profitable, with an assured long-term market in Israel, without the need for high capital investment.
Chevron, though, showed interest in the East Med earlier, especially Egypt, where it has been present since 1937. In addition, Egypt’s…