BP and Abu Dhabi suspend talks to acquire stake in Israeli gas fields

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BP and Abu Dhabi National Oil Co. have suspended talks to acquire a 50% stake in Tel Aviv-listed NewMed Energy for $2 billion as Israel's war with Hamas enters its sixth month.

The Israeli gas producer said in a statement on Wednesday that the two sides had halted talks “due to uncertainty caused by the external environment,” without explicitly mentioning the Gaza conflict.

NewMed said both parties remain interested in the deal, but the process will remain on hold “until discussions resume or the process is terminated.” BP and ADNOC announced in March 2023 plans to acquire half of NewMed, the majority owner of the Leviathan offshore oil field.

The suspension marks the first major business deals to be disrupted by the war in Gaza, which has killed more than 31,000 people, according to the Palestinian territory's health authorities.

Israel has been at war in the Gaza Strip since Hamas launched a surprise attack on Oct. 7 that killed 1,200 people and took about 250 hostages, according to Israeli authorities. The conflict has severely hampered efforts to strengthen ties between the Jewish state and some of its Middle Eastern neighbors, including the United Arab Emirates.

“There is no certainty that discussions or an agreement will resume in the future, or whether the terms of an agreement should be reached,” NewMed said.

BP and ADNOC declined to comment beyond NewMed's statement.

Biraj Borkhataria, an analyst at RBC Capital Markets, said it was not surprising that talks were paused given the “background and context,” adding that the size of the proposed deal meant its suspension would not have a significant impact on BP's strategy.

When the two companies announced plans last year to make a non-binding offer to acquire a stake in Israel's Delek Group's NewMed, BP said it would be an “important first step” in establishing a joint venture focused on gas development. ” projects in “areas of common interest.”

Adnoc shares fell 5.9% on Wednesday morning, bringing their year-to-date loss to 15.4%.

The agreement will be the next step in deepening commercial ties after the UAE and Israel agreed to normalize relations in 2020. They subsequently signed a trade agreement aimed at increasing bilateral trade to more than $10 billion within five years.

Before announcing the proposed stake sale, NewMed had been in merger talks with Britain's Capricorn Energy, but the deal fell through due to opposition from activist shareholders.

While BP insists it is committed to cutting oil and gas output, it has begun to slow its retreat in response to pressure from shareholders and Russia's full-scale invasion of Ukraine, prompting countries that have been aggressively pushing to cut energy production. Link emissions to energy security.