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BP and the Abu Dhabi National Oil Company have suspended talks on a $2bn deal to buy a 50 per cent stake in Tel Aviv-listed NewMed Energy, as Israel’s war with Hamas enters its sixth month.
The Israeli gas producer said in a statement on Wednesday that the parties had halted talks “due to the uncertainty created by the external environment” but did not explicitly reference the conflict in Gaza.
The parties were still interested in a transaction but the process would remain suspended “until such time as discussions resume or the process is terminated”, NewMed said. BP and Adnoc announced in March 2023 that they planned to acquire half of NewMed, majority owner of the Leviathan offshore field.
The suspension marks one of the first major corporate deals to be thrown off course by the war in Gaza, where more than 31,000 people have died, according to health authorities in the Palestinian territory.
Israel has been at war in Gaza since Hamas mounted a surprise raid on October 7, killing 1,200 people and taking about 250 hostages, according to Israeli authorities. The conflict has severely impeded attempts to strengthen relations between the Jewish state and some of its neighbours in the Middle East, including the United Arab Emirates.
“There can be no certainty that discussions will resume or that an agreement will be reached in the future, nor as to the terms of an agreement should one be reached,” NewMed said.
BP and Adnoc declined to comment beyond NewMed’s statement.
It was not surprising that the talks had been suspended given the “background and context”, said Biraj Borkhataria, analyst at RBC Capital Markets, adding that the size of the proposed transaction meant that its suspension would not have a material impact on BP’s strategy.
When the companies announced last year their plan to make a non-binding offer to buy the stake in NewMed, owned by Israel’s Delek Group, BP said it would be a “significant first step” in establishing a joint venture that would focus on developing gas projects in “areas of mutual interest”.
Shares in Adnoc dropped 5.9 per cent on Wednesday morning, taking their loss this year to 15.4 per cent.
The deal would have been a next step in deepening commercial ties between the UAE and Israel after the two countries agreed to normalise relations in 2020. They later signed a trade agreement aimed at boosting bilateral trade to more than $10bn within five years.
Before the announcement of the proposed stake sale, NewMed had been in talks over a merger with UK’s Capricorn Energy, but that deal collapsed after activist shareholders opposed it.
While BP insists that it is committed to cutting oil and gas production, the company has moved to slow its retreat in response to pressure from shareholders and as Russia’s invasion of Ukraine prompted countries that had been aggressively pushing for a reduction in energy-linked emissions to focus on energy security.
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