(Bloomberg) --

BP Plc and Abu Dhabi National Oil Co. will form a natural gas joint venture and have made an offer to take Israel’s NewMed Energy private in a deal worth around $2 billion.

The move will deepen BP’s presence in the eastern Mediterranean and mark Adnoc’s first venture into the region, which has seen several major gas finds in the past 15 years and attracted billions of dollars of investment from energy firms.

Those reserves have taken on added importance since Russia’s invasion of Ukraine, with Europe desperate to replace piped supplies from Moscow, easily its biggest supplier before the start of the war.

The proposed acquisition may be followed by other BP-Adnoc gas deals in the Mediterranean and beyond, according to a BP spokesperson.

Israel’s been wracked by protests in recent weeks over Prime Minister Benjamin Netanyahu’s proposed judicial overhaul. The political crisis threatened to delay the deal with NewMed before the companies decided to push ahead, a person familiar with the matter said.

NewMed Surges

BP and Adnoc plan to purchase 50% of NewMed by buying the roughly 45% of its stock that’s free floating and part of Delek Group Ltd.’s stake. They have made a non-binding offer of 12.05 shekels for each share, a premium of about 72% to NewMed’s closing price in Tel Aviv on Sunday of 7 shekels.

NewMed soared 37% to 9.98 shekels as of 3:45 p.m. in Tel Aviv on Tuesday. Delek jumped 15%.

The offer is “the result of a long journey, a long partnership with BP and Adnoc starting with good chemistry and then becoming a more meaningful relationship,” Yossi Abu, NewMed’s chief executive officer, said in an interview. “This partnership is about the east Mediterranean — Israel, Cyprus and Egypt.”

East Med Finds

NewMed owns a 45% stake in Leviathan, Israel’s biggest gas field, and 30% of Aphrodite, located off Cyprus.

Delek Group holds 55% of NewMed, which was called Delek Drilling until a rebranding early last year.

The discovery of Leviathan and other fields such as Tamar have significantly boosted Israel’s energy security and turned it into a gas exporter. Some of its gas is piped to Egypt and re-exported in liquefied form to Europe.

NewMed is considering building Israel’s first liquefied natural gas export terminal, according to Abu, enabling it to send shipments of the fuel directly. With a capacity of 4.5 million tons, it would be one of the biggest floating liquefaction facilities in the world.

BP and Adnoc “have technical and operational experience in floating LNG facilities and also marketing LNG,” Abu said.

For BP, the NewMed move comes as it pivots back to its fossil-fuel roots after spending the past few years focused on growing its renewables businesses. In a strategy update earlier this year, the company lowered its ambition to cut oil and gas output this decade.

If approved, the deal will be Adnoc’s first major international acquisition of a gas- or oil-producing asset. The United Arab Emirates’ state energy producer — which has benefited from a surge in prices over the past year — in November said it would spend billions of dollars expanding its foreign gas, chemicals and clean-energy operations.

The UAE and Israel normalized ties in 2020 as part of what were known as the Abraham Accords. The countries said the political deal would lead to billions of dollars of investment in Israel. Mubadala Investment Co., an Abu Dhabi wealth fund, owns 11% of the Tamar field.

(Updates share price moves. An earlier version of this story corrected Adnoc’s full name.)

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