BP (BP) has been awarded a license to explore for natural gas in Israeli waters along with Azerbaijan state oil company Socar and local company NewMed Energy (DKDRF). The move, announced Monday as part of an strategic energy deal between Azerbaijan and Israel, comes as the British oil major steps up oil and gas exploration and production efforts after abandoning its green agenda under investor pressure.
According to Reuters, the three companies placed a joint bid for licenses relating to two offshore blocks for the so-called Cluster I near the Leviathan field, which is operated by Chevron (CVX). Socar will act as operator of the exploration consortium while the deal sees BP involved in Israel’s natural gas sector for the first time as the gas-rich region around Egypt, Israel, Cyprus and Lebanon draws interest from more oil giants.
Strategic Asset
“Natural gas is a strategic asset that strengthens our economic and diplomatic standing worldwide, particularly in the Middle East,” said Israel’s Energy Minister Eli Cohen, according to Reuters. “That’s why we are working to expand natural gas production for both the domestic market and exports, especially in these times.”
BP last year shelved plans to take a $2 billion major stake in NewMed along with the Abu Dhabi National Oil Company due to the war in Gaza. NewMed has a 45% stake in the CVX-operated Leviathan gas field offshore Israel, considered one of the largest in the region.
It comes as BP resets its corporate strategy to focus on more upstream oil and gas projects after a lackluster share price performance compared to peers. In recent weeks there have been significant changes with the company slashing renewable energy investment by $5 billion a year to between $1 billion and $2 billion. At the same time, BP is looking to boost funding for oil and gas extraction to $10 billion annually, as it pivots back to fossil fuels. Scrapping its plan to cut oil and gas production by 2030 it now plans to grow production to 2.3–2.5 million barrels of oil a day by the end of the decade.
Is BP a Buy or Sell?
Turning to Wall Street, BP stock has a Moderate Buy consensus rating based on four Buys, six Holds, and one Sell assigned in the last three months. At $34.65, the average BP price target implies about 3% upside potential.
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