Mubadala Petroleum signed a preliminary non-binding agreement with Israel's Delek Drilling for a 22 per cent non-operated stake in the offshore Tamar field in the Eastern Mediterranean, the Abu Dhabi company said on Monday.
The deal is worth $1.1 billion, according to a statement posted by the Israeli company.
"The proposed transaction is in line with our strategy of seeking high quality, value accretive and ESG-compliant investments that strengthen our gas-biased portfolio in line with our energy transition targets," Mubadala Petroleum said in a statement. ESG refers to environmental, social and governance-based investing.
"We look forward to pursuing the next steps in this process," the Abu Dhabi company added.
Israel has seen a rush in gas developments following exploration work in the Tamar and Leviathan gas fields in the Eastern Mediterranean.
There has been growing interest from the Gulf in the potential of the Eastern Mediterranean for further gas yields.
Large discoveries such as the Zohr gas field offshore Egypt, have transformed the fortunes of the Arab world's populous state from being importer to an exporter of the fuel.
Mubadala Petroleum already operates in the Eastern Mediterranean within the Zohr gas field through the Shorouk Concession, in which it has a 10 per cent stake.
Under the terms of the preliminary agreement between Mubadala Petroleum and Delek Drilling, the Israeli firm will sell its 22 per cent interest in the Tamar and Dalit leases, as well as the partnership's rights in the joint operating agreement governing the leases.
Other partners in the Tamar concession are Noble Energy that has a 25 per cent stake, Isramco that retains a 28.75 per cent interest, Tamar Petroleum which holds a 16.75 per cent stake, Dor Gas and Everest with 4 per cent and 3.5 per cent interests, respectively.
Should the sale of Delek's stake proceed, Mubadala Petroleum will make an unconditional payment of $1bn and a contingent payment of up to $100 million, which is subject to terms and conditions in the definitive agreement.
The approvals of the petroleum commissioner and consents from various parties in the concession will be included in the definitive agreement, according to Delek Drilling. A definitive agreement is likely to be finalised "no later than May 31, 2021", the company said.
Israel has become an exporter of gas, supplying neighbouring Jordan, which imports more than 90 per cent of its energy needs.
Export of gas from the Tamar field was the first to be approved by the Israeli government. Last year, Tel Aviv began exports to Amman under a $10bn agreement to supply gas for 15 years.
The Tamar field, which lies to the the west of the Israeli city of Haifa, was discovered by Noble Energy in 2009. The field, which is estimated to have 200 billion cubic metres of gas is the largest find of its kind in the Eastern Mediterranean's Levant basin.
A 2010 US Geological Survey estimated the Levant Basin in the Eastern Mediterranean could hold as much 122 trillion cubic feet of gas, which equals the total reserves of Iraq, the Middle East’s second-largest crude producer.
Following interest in the region's potential, Israel launched a third offshore bid round for oil and gas exploration in June 2020. In the previous round, it awarded 12 new exploration licences. The country is appraising development work in the Karish gas field, adjacent to the Leviathan and Tamar fields.