Drilling platform of the Leviathan natural gas field.
Drilling platform of the Leviathan natural gas field. Photo by Albatross
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The first customer to sign up to buy gas from Israel’s giant Leviathan field is the Palestine Power Generation Company, which is developing an electric power plant near Jenin.

The three Israeli partners in Leviathan – Avner, Delek Drilling and Ratio -- told the Tel Aviv Stock Exchange on Sunday that PPGC had agreed to buy $1.2 billion worth of gas over a 20-year period that will begin when the field begins producing.

The 4.75 billion cubic meters of gas the Palestinian utility is buying is relatively small compared to the contracts a host of Israeli gas consumers have signed for gas from the Tamar field. Nevertheless, it marks the first-ever contract for Leviathan gas.

“I believe a strong and stable economy shared by the two sides will bring peace and stability to the entire region, so that everyone will enjoy prosperity and economic growth,” said Yitzhak Tshuva, whose Delek Group controls two of the Leviathan partners.

Leviathan has an estimated 538 billion cubic meters of reserves and it may have petroleum as well. PPGC has the right under the contract to reduce the amount of gas it buys.

The news of the contract came out of the end of the trading day on the Tel Aviv Stock Exchange, so that the impact of the sale wasn’t reflected in the partners’ share prices. Ratio rose 3%, Avner , 0.8% and Delek Drilling by 0.3%. Delek Group, which controls the latter two companies, climbed 1% by close.

The biggest of the Leviathan partners, Noble Energy, is based in Texas and trades on Wall Street.

PPGC is constructing a $300 million, 200-megawatt power plant that will take 30 months to complete. It is controlled by the Palestine Electric Company but counts other shareholders as well.

The Palestinian Authority accounts for 8% of all electricity consumption in Israel and the West Bank, with annual consumption growing at about 6%.

The agreement include several conditions, among them final approval to develop the Leviathan field by the sellers as well as all the regulatory approvals to export gas as well as financing. The buyers also conditioned their side of the deal on completing the construction of the power plant.

Under the gas-export policy established by the Israeli government, gas sold to the PA and to Jordan will be considered part of Leviathan’s export quota. All told, 40% of Israel’s natural gas can be exported under the rules approved by the cabinet last year.

Last week, the Leviathan partners reported progress in talks with the Australian energy company Woodside, which agreed in principle over a year ago to take a 30% stake in the field for $1.25 billion. Reports says that the two sides have agreed that Woodside will pay several-hundred million dollars more than the original agreement called for as prospects are growing that the gas will be exported by pipeline to regional customers, mainly Turkey, instead of as liquefied natural gas to East Asia.