Noble gets Leviathan green light

June 2, 2016

Noble Energy has received approval to move forward with the development of Leviathan, offshore Israel, in addition to inking a US$2.5 billion deal to supply up to 473 Bcf from the highly anticipated project.

Image from Delek.

The Houston-based explorer, along with its partners, got the green light from the Petroleum Commissioner in the Ministry of National Infrastructure, Energy and Water Resources for plan of development (POD) for Leviathan today (2 June).

The POD consists of a subsea system that connects production wells to a fixed platform located offshore with tie-in onshore in the northern part of Israel.  The fixed platform's initial capacity is anticipated to start at 1.2 Bcf/d of natural gas and is expandable to 2.1 Bcf/d.  Leviathan is expected to provide a second source of supply and entry point into Israel's domestic natural gas transport system, while also delivering exports to regional countries, Noble Energy said.  

"Receiving support from the Government of Israel for the POD further builds upon recent regulatory momentum, including the Israeli Government's approval of the revised stability language in the Natural Gas Regulatory Framework as well as the National Planning Committee's approval of the offshore location for the Leviathan platform and pipeline connection onshore,” J. Keith Elliott, Noble Energy senior VP, Eastern Mediterranean said. 

In addition to the approval, the Leviathan partners entered into an 18-year gas sales and purchase agreement to supply a gross quantity of up to 473 Bcf of natural gas from the Leviathan field to IPM Beer Tuvia (IPM).

Upon the terms of the agreement, the gas will be supplied to a new-build independent power facility over an 18-year term, or up to 72 MMcf/d.  Noble Energy said it expects the natural gas sales to IPM to commence at field startup, with total gross revenues under the deal to be in excess of $2.5 billion.  The agreement is subject to regulatory approvals.

“Noble Energy and partners have made quick progress marketing natural gas to new customers.  Combined with a prior executed sales agreement, we have now contracted volumes from Leviathan to the Israel market in the amount of approximately 100 MMcf/d, with substantial volumes yet to contract in Israel and the region,” Elliott said. “Strong momentum on the regulatory and marketing fronts represents major steps in advancing the Leviathan project towards final investment decision."

Leviathan is located in the Levantine Basin in the Mediterranean Sea, about 130km off the coast of Israel at 1600m water depth. It is considered to be one of the biggest discoveries it the past decade with an estimated 22 Tcf of recoverable natural gas resources. . The field was discovered in 2010.

Late last month, the partners presented a revised development plan and reached an agreement with the Israeli government. Part of the development plan terms was a 10-year stability clause, which stated that the Israeli government couldn’t impose regulatory changes, such as breaking up monopolies, on the Leviathan partners for a 10-year period. 

In March, a ruling by Israel's Supreme Court put the brakes on the project, further delaying. According to Noble Energy, the court affirmed Israel's natural gas regulatory framework, with the exception of the stability provisions, concluding that the Israeli government should provide stability assurances and provisions through an alternate legal mechanism, and gave the government up to one year to resolve the issue.

In February this year, the Leviathan partners submitted a new plan for the field to the country's authorities that decreased the development cost by some $1 billion, increased production capacity by 5 Bcm to 21 Bcm annually, and aimed to bringing the project onstream by Q4 2019. 

Noble Energy operates Leviathan with a 39.66% working interest with its Leviathan partners: Delek Drilling (22.67%), Avner Oil Exploration (22.67%), and Ratio Oil Exploration (15%).


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