Energy Ministry Consultants Say Leviathan Not as Big as Previously Estimated

As Israel wrestles with how to manage the major natural gas finds that have been discovered off the country’s Mediterranean coast in recent years, the Energy and Water Resources Ministry is now looking into the possibility that the biggest find – the Leviathan field – may be 5% to 10% smaller than previously estimated.

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TheMarker has learned that the issue arose several months ago as a result of calculations by two energy resource inspection and certification companies – SGS of the Netherlands and IHS CERA of the United States. The firms were hired by the Energy Ministry to validate the data the ministry received from natural gas exploration companies operating in Israel, and it is understood that the two companies’ estimates for the Leviathan field were somewhat lower than those Leviathan partner Noble Energy of Texas had reported.

Based on a professional opinion by the NSAI engineering firm, Noble had reported prospects under the best case scenario of extracting 535 billion cubic meters of gas from Leviathan. It is believed that the assessments of the two firms hired by the Energy Ministry were 5% to 10% lower. This would not only reduce the estimated value of the gas at the Leviathan site, but could also result in a reduction of the amount available by the Leviathan partners for export (the Israeli government has capped the amount of gas reserves that can be exported at 40%).

Over the weekend, industry sources reacted cautiously to the disparity, saying that it’s a matter of interpretation. They added that the two firms hired by the ministry did not take into consideration recent data from drilling at the area of the site known as Leviathan 4. The Energy Ministry declined to comment on the apparent disparity, saying that information “relevant to the sector” was examined on a regular basis by its own staff and its consultants. Noble and Delek refused to comment.

The Delek group currently owns 45% of Leviathan through its Avner and Delek Drilling units, while Noble Energy controls 40% and Ratio Oil Exploration owns 15%. Australia’s Woodside Petroleum has plans to acquire a 25% stake in the site, but hasn’t finalized its commitment while seeking better tax treatment from the Israeli government.

The ministry is thought to be reluctant to release the conflicting data both because of its commercial and public sensitivity and due to efforts first to investigate the reason for the discrepancy. There have been a number of meetings between representatives of Noble Energy, NSAI and the ministry’s two consulting firms on the issue in recent months.