Offshore drilling rig in the Tamar field, east of the Leviathan. (Albatross Aerial Perspective/AP Images)
A pair of Dewey & LeBoeuf defectors now with Akin Gump Strauss Hauer & Feld are advising the Palestinian Power Generation Company (PPGC) on a 20-year, $1.2 billion deal to purchase natural gas from Israel’s Leviathan offshore gas field.
Announced Sunday at the historic American Colony Hotel in Jerusalem, the landmark deal calls for a group of energy companies to begin selling gas from Leviathan to the privately owned PPGC within three years. In turn, the PPGC will build a $300 million natural gas processing plant in the West Bank city of Jenin.
While the discovery in November 2010 of the Leviathan field—which sits about 80 miles west of the Israeli coastal city of Haifa—could end up having a major impact in the politically volatile Middle East, offshore oil production is not expected to begin until 2017.
John LaMaster, an Akin energy and M&A partner based in the firm’s London office, is working with corporate partner Marc Hammerson and associate Caroline-Lucy Moran on the deal for PPGC. The Palestinian power company also relied on James-Antony Platania, a senior in-house lawyer with Athens-based parent Consolidated Contractors Company, a previous client of LaMaster’s, which is one of the largest construction companies doing business in the Middle East. (CCC’s group general counsel is Edgard Marina.)
Hammerson, who only joined Dewey in October 2011 from British firm Stephenson Harwood, and LaMaster joined Akin in May 2012 as their now-defunct former firm began its final descent into bankruptcy. Dewey’s former energy group scattered to a handful of such Am Law 100 firms as Baker Botts and Morgan, Lewis & Bockius. (Steven Otillar, a Houston-based Dewey energy partner who also joined Akin, settled a dispute with Citibank last year over a loan he took out to cover his capital contribution to the bankrupt firm.)
LaMaster and Hammerson had already been tapped to take the lead for PPGC on its talks with the consortium of energy companies that hold drilling rights to the Leviathan field. When the duo left Dewey, they took the assignment with them. As one might expect—given the long-standing antipathy between Israel and the Palestinians, who are seeking a state of their own—the negotiations were complicated by other issues.
“We’ve been working on this for more than three years,” says LaMaster, who spoke with The Am Law Daily by phone from London. “And there were a number of times where we were close to getting something done before negotiations broke off, only to start again.”
Perhaps one of the biggest hurdles was a November 2012 conflict in the Gaza Strip between Israel and Palestinian militant group Hamas, which temporarily scuttled any possibility that the Jewish state would share its natural resources with its longtime adversary.
But LaMaster says rivalries between ruling Palestinian factions—Hamas governs the Gaza Strip, while the Palestinian Authority holds sway in the West Bank—actually helped push Israel toward a deal with PPGC. While the West Bank remains separated from Israel proper by a massive wall, Israeli Prime Minister Benjamin Netanyahu’s government aims to favor the PA in its West Bank stronghold over Hamas in its Gaza Strip base, where the more militant faction continues to refuse to recognize the Jewish state’s right to exist.
The decision to export natural gas from Israel, a country where natural resources are in limited supply, also faced some opposition. LaMaster says foreign oil companies that won Leviathan concessions campaigned to export some gas from the field in order to monetize their asset.
In June, the Israeli cabinet approved a plan to export 40 percent of its reserves while keeping 25-year supply for domestic consumption. Four months later, the Israeli Supreme Court upheld that controversial decision.
The Leviathan consortium that reached a deal with PPGC—a group that includes Houston-based Noble Energy and Israeli firms Ratio Oil Exploration, Delek Drilling Ltd. and Avner Oil Exploration—all backed that ruling. Noble, which U.S. Senate records show paid $100,000 to Arent Fox through the first three quarters of last year to lobby on offshore oil and gas liability issues, owns a roughly 40 percent stake in the Leviathan field. Delek and Avner each own 22.67 percent stakes, and Ratio Oil owns the balance.
The consortium was advised on the PPGC agreement by Dan Hacohen, a name partner at Jerusalem’s Agmon & Co., Rosenberg Hacohen & Co., which is widely considered one of Israel’s top energy lawyers. Noble’s general counsel is Arnold Johnson. Edward Cox, a former chair of the corporate department at Patterson Belknap Webb & Tyler and son-in-law of former President Richard Nixon, serves as an independent member of the board of directors at Noble, along with Michael Cawley, a former name partner at Oklahoma firm Thompson, Cawley, Veazey & Burns.
LaMaster says that finalizing the deal requires the closing of two project finance agreements: one connected to the Jenin power plant, the other involving offshore gas extraction facilities in the Leviathan field.
For Israel, a country that has taken measures to overhaul its economy and recently signed a water-sharing agreement with the PA and Jordanian government, the PPGC deal marks what it hopes will lay the foundation for the resumption of peace talks with the Palestinians.
In other energy-related transactional news announced this week, Morgan Lewis partner Charles Engros Jr. and Robert Dickey snagged the lead role advising Swedish manufacturer Sandvik on its $740 million acquisition of Carrollton, Texas–based oil drilling equipment company Varel International Energy Services. (Engros, a veteran M&A lawyer who heads Morgan Lewis’ New York office, worked on the matter with associates Karl Goodman and Andrew Milano.)
Elsewhere on the energy front, Vinson & Elkins energy M&A partner Douglas Bland—who also serves as his firm’s hiring partner—is leading a team advising SandRidge Energy on the $1.1 billion sale of its Gulf of Mexico properties to Houston’s Fieldwood Energy LLC. Fieldwood, a Houston-based portfolio company of private equity firm Riverstone Holdings LLC, is being advised by a team of lawyers from Simpson Thacher & Bartlett and Thompson & Knight, according to our reporting. Vinson also advised BreitBurn Energy Partners last month on the completion of its $282 million purchase of oil and gas assets in the Permian Basin of Texas.
As The Am Law Daily and, more recently, sibling publication Texas Lawyer have reported, the Lone Star State’s booming energy sector has helped entice a healthy number of Am Law 100 firms to open outposts in Houston in recent years. The nation’s shale gas revolution has had other consequences. The Associated Press reported this week that four states—Ohio, Pennsylvania, Texas and West Virginia—have reported well-water contamination as a result of oil and gas drilling.