Israel's Leviathan Gas Field Group Submits $6.5b Development Plan

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Drilling at the Leviathan natural gas field off the Mediterranean shore. Credit: Courtesy Albatross

The partners in Leviathan, Israel’s largest natural gas field, have submitted their initial development plan to Israeli authorities, which one source said Tuesday envisages producing 16 billion cubic meters of gas a year.

The group, led by Texas-based Noble Energy and Israel’s Delek Group, handed in its proposal – a $6.5 billion endeavor – after months of trying to determine the best way to develop the field, which lies in about 1,500 meters of water about 130 kilometers off Israel’s Mediterranean coast.

A spokeswoman for the Energy and Water Resources Ministry, which must now approve the plan, confirmed it had been received, but disclosed no details.

With estimated reserves of 622 BCM, Leviathan is one of the world’s largest offshore discoveries of the past decade, but the partners have had difficulties identifying overseas markets for gas.

Talks to bring in Australia’s Woodside Petroleum, a liquefied natural gas specialist for potential customers in East Asia, fell through in March. Turkey, a potential market, has conditioned buying Israeli gas on political demands, including easing Israel’s blockade of the Gaza Strip. Besides being a large market in its own right, Turkey could also serve as a gateway to Europe through a 8-12 BCM a year pipeline.

Israel had set a November deadline for Leviathan developers to submit their plans. Failure to meet the deadline would open the door to production delays beyond 2018, when a raft of new export projects around the world threatens to depress profits.

An industry source said the first stage of the Leviathan plan sees construction of a floating production, storage and offloading unit passing 16 BCM of gas a year via pipelines to Israel, the Palestinian Authority and other neighbors that decide to buy the gas.

Production is expected to begin by 2018 and initial investment could reach $6.5 billion, the source said, which was in line with previous forecasts.

The Leviathan partners are in talks with Britain’s BG Group, which wants to bring gas in to feed its Egyptian LNG export plant, and with Jordan’s national electricity company.

Later development plans were not included in the proposal, and could include direct LNG exports to more distant markets, officials have said.

Shares of Delek Drilling and Avner, the two Delek Group units holding stakes in Leviathan, rose in Tel Aviv Stock Exchange trading Tuesday. Delek closed up 0.1% at 20.16 shekels ($5.47) and Avner by 0.2% to 3.65 shekels.

Ratio, another Israel partner in Leviathan, late on Monday completed the institutional tranche of an offering of bonds and warrants aimed at raising money for its share of the development costs. The sale drew orders for 510 million shekels, two-and-half times the amount on offer, prompting Ratio to increase the size of the sale from 250 million shekels to 320 million shekels.

The remaining 76 million shekels of the bonds were due to be sold in a public tranche late Tuesday. Ratio shares finished 0.8% higher at 49 agorot in Tel Aviv.

With reporting by Eran Azran.

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