Even as Israel’s High Court of Justice weighs a petition seeking to bar the gas framework, the companies developing the Leviathan field said Thursday they were increasing their production forecasts and expect to bring the project online in 2019.
In a report whose timing makes it inevitable that it will be read by the High Court justices, the group said its new development plan calls for the field to be producing 21 billion cubic meters of gas each year, up from 16 BCM in their initial plan.
That means that together with the Tamar field — which is already in production and is controlled by the same partnership — annual gas production in Israel will double to 24 BCM.
The companies also lowered the estimated cost of the project to $5 billion to $6 billion from a previous range of $6 billion to $7 billion. However, a final investment decision is due to be made by the partners later this year amid falling world energy prices and questions about whether there are export markets for the Leviathan gas.
In addition, Noble is contending with a heavy debt loan and cash problems that have forced it to cut back capital spending and dividend payouts.
“You can say that the Leviathan project got underway today,” said Yossi Abu, CEO of Delek Drilling and Avner, two units of the Delek Group, which is the lead partner in Leviathan, together with Texas-based Noble Energy.
Shares for Leviathan’s Israeli partners were higher on Thursday, but only modestly despite the increased production outlook and faster development timetable. Avner ended up 1.3% at 2.14 shekels (54 cents), Delek Drilling added 0.6% to 10.66 and Ratio rose 1.2% to end at 25 agorot.
Bank Hapoalim analysts said the program hinted that the Leviathan partners were now focused on the domestic market and perhaps that any contract with BG Group in Egypt would be delayed.
Leviathan was discovered in 2010 in the eastern Mediterranean and has estimated reserves of 622 BCM, but development has been held up due to regulatory delays and changes. The latest glitch is with the gas framework, which puts into place the elements of a regulatory regime for the industry. The High Court is weighing claims that its terms are unlawful.
The development plan presented on Thursday includes drilling eight wells to be connected by a subsea pipeline to an offshore platform that will process the gas.
One exit point capable of handling up to 12 BCM a year will be for Israel’s use, as well as for bringing supplies to neighboring markets in the Palestinian Authority, Jordan and Egypt. A second exit point to handle up to 12 BCM will be solely for export.
Liran Lublin, an analyst at IBI Israel Brokerage & Investments, praised the investment program as flexible, enabling the partners to adjust production based on the contracts they signed, but he called the three-year development timetable “ambitious.”