BP and UAE halt $2 billion gas deal in Israel amidst ongoing conflict in Gaza

BP and an oil company owned by the United Arab Emirates have decided to put a pause on negotiations to purchase a 50% stake in Israel’s top natural gas producer. The $2 billion deal was considered too risky amidst the ongoing war in Gaza.

NewMed Energy announced on Wednesday that all three companies have mutually agreed to halt discussions on the deal. This decision was made due to the uncertain and challenging external environment.

BP (BP) and Abu Dhabi’s state oil company Adnoc have expressed their continued interest in the proposed transaction, as stated in a recent announcement by NewMed Energy. However, specific details regarding the conditions under which talks may resume were not provided.

NewMed Energy emphasized that there is no guarantee that discussions will indeed restart or that a final agreement will be reached in the future. Additionally, the terms of any potential agreement remain uncertain at this time.

BP and Adnoc both declined to provide further comments, only confirming the content of the NewMed statement. As a result, NewMed Energy's shares dropped by up to 7% in Tel Aviv.

This situation underscores the effects of the conflict in Gaza on businesses operating in the Middle East. Some well-known Western companies such as Starbucks, McDonald’s, KFC, and Pizza Hut have experienced boycotts from customers in the region who believe they are connected to or backing Israel's actions in Gaza.

A picture taken on June 10, 2017, shows a Seattle-based Starbucks Coffee shop at the Avenue Mall in Kuwait City. / AFP PHOTO / Yasser Al-Zayyat (Photo credit should read YASSER AL-ZAYYAT/AFP via Getty Images)

This photo, taken on June 10, 2017, captures a Starbucks Coffee shop in Kuwait City at the Avenue Mall. The image credit goes to Yasser Al-Zayyat.

Yasser Al-Zayyat/AFP/Getty Images

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BP had revealed their intention to invest in NewMed Energy almost a year ago. This move was a part of their strategy to collaborate with Adnoc in extracting natural gas from regions they both find promising, such as the eastern Mediterranean.

The proposed transaction between Israel and the UAE was viewed as a sign of their growing financial relationship after establishing diplomatic ties in 2020. However, the ongoing conflict has put a strain on this relationship, with the UAE urging for a ceasefire in Gaza.

Following the Hamas attacks on Israel on October 7 that sparked the conflict, a BP executive expressed optimism about the NewMed deal to investors, as reported by Reuters.

BP and Adnoc have decided to purchase 50% of NewMed Energy. This acquisition involves buying the company's publicly traded shares, as well as acquiring a portion of the stake currently held by Delek, an Israeli energy conglomerate.

NewMed Energy is the owner of 45.34% of the Leviathan Reservoir, which is known as the largest gas reservoir in the Mediterranean region. It is also the site of one of the world's most significant deepwater gas discoveries. Additionally, Chevron currently holds a 39.66% stake in this reservoir.

BP was recently awarded a license by Israel’s energy ministry to explore for natural gas off the country’s Mediterranean coast. Additionally, BP and Adnoc are collaborating on other projects, including a joint venture to develop natural gas assets in Egypt.

Editor's P/S:

The ongoing conflict in Gaza underscores the impact of geopolitical tensions on business decisions. BP and Adnoc's decision to pause negotiations on a major deal with an Israeli energy company highlights the challenges of operating in a volatile region. The suspension of talks reflects the uncertainty and risk associated with the conflict, which has strained diplomatic relations between Israel and the UAE. The boycott of Western companies in the region further demonstrates the potential consequences for businesses operating in the Middle East during times of conflict.

Despite the challenges, BP and Adnoc have expressed continued interest in the deal, signaling their long-term commitment to the region. The potential acquisition of a stake in NewMed Energy would provide access to significant natural gas resources in the eastern Mediterranean, a strategic area for energy exploration and development. The deal would also strengthen the financial relationship between Israel and the UAE, which have been working to improve ties since establishing diplomatic relations in 2020. The outcome of the conflict in Gaza will likely determine the fate of the proposed transaction and the future of business relations in the region.