Report: ExxonMobil in Talks on Natural Gas Deal in Israel

Energy giant eyes selling gas from Leviathan drilling site in markets not accessible by pipeline, sources tell Bloomberg, making it first oil major to operate in the country

File photo: The foundation platform of Leviathan natural gas field, off the coast of Haifa, January 31, 2019.
Marc Israel Sellem/Pool via Reuters

ExxonMobil, the world’s largest publicly traded energy company, is in discussions to build a liquefied natural gas platform that would enable the Leviathan field to export its natural gas to distant markets, Bloomberg News reported on Wednesday.

Unidentified sources said an LNG ship, which would carry facilities to convert natural gas into a form that can be transported by tanker, would enable it to be sold in markets not accessible by pipeline. That would not only expand the offshore Leviathan field’s potential market but also attract other companies to Israel to drill for gas.

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An Exxon official told Bloomberg that the company was still evaluating its options. Others warned that a deal may not be consummated. “It’s too early to comment on specific development and production time lines,” the representative told Bloomberg

Nevertheless, the news sent Israeli energy shares higher. Leviathan’s Israelis partners, Delek Drilling and Ratio, closed up 4.6% to 11.50 shekels ($3.21) and 2.9% to 2.92 shekels respectively on the Tel Aviv Stock Exchange. In New York, Noble Energy was trading 3.2% higher at $25.29 mid-afternoon local time.

The report comes less than three weeks after Reuters reported that Exxon Mobil was considering exploring for oil and gas in Israel. That would make Exxon the first oil major to operate in the country, which technically doesn’t have diplomatic relations with the Gulf Arab states.

U.S. energy companies and their major competitors, such as Royal Dutch Shell and France’s Total, have avoided investing in Israel for fear of souring relationships with the governments of giant regional oil and gas producers such as Saudi Arabia, Kuwait and Iraq, which do not recognize Israel. Israeli gas production is dominated today by a handful of local firms, as well as U.S.-based Noble and Greece’s Energean.

But, citing unnamed sources, Reuters said Exxon executives held talks with Israeli Energy Minister Yuval Steinitz in Houston last month about bidding for the right to explore and pump oil from offshore blocks in an auction that Israel will hold in June. Efforts by Israel to develop onshore LNG facilities in either Ashkelon or Eilat have been frustrated by environmental concerns and the security risks.

Instead, Israel has been looking for an indirect route by exporting its gas by pipeline to idle LNG facilities in Egypt. It has also sought out nearby exports markets in Egypt and Jordan, where the gas could be shipped by pipeline. It is also exploring a costly and technically challenging alternative of building an undersea pipeline to Europe in partnership with Cyprus and other countries.

Exxon Mobil is already active in the Eastern Mediterranean basin. In February, together with its partner Qatar Petroleum, it announced a major gas discovery in Cyprus not far from Leviathan.