On behalf of the partners in the Leviathan offshore reservoir, Noble Energy signed a letter of intent on Wednesday to supply about 45 billion cubic meters of natural gas to Jordan’s National Electric Power Company over a 15-year period.

If the non-binding letter of intent progresses into a full-fledged deal, the Leviathan partners would likely deliver the gas supply across the land border to Jordan, Noble Energy announced. A final gas purchase and sales agreement is expected to be completed in 2014, but sales volumes will likely begin at a rate of 9 million cubic meters of gas daily, according to the Houston-based company.

Completion of the deal will be subject to the regulatory approvals of Israel and Jordan, among other conditions, Noble Energy stressed. In addition to the respective national governments, the parties are working in coordination with the US Department of State, the firm added.

“We look forward to working with NEPCO and supporting economic prosperity across the region through development of these world-class energy resources,” said Keith Elliot, Noble Energy’s senior vice president for the Eastern Mediterranean, who attended the signing along with Delek Drilling CEO Yossi Abu.

“This letter of intent and other recent regional export arrangements are advancing the first phase of development at the Leviathan project, which is being designed with capacity for 1.6 billion cubic feet [48 million cubic meters] of natural gas per day,” Elliot continued.

While Channel 2 reported that the deal is worth more than $15 billion, Noble Energy simply that the price for the gas will be based primarily on linkage to Brent oil prices, and will be dependent on negotiations for a binding agreement. The exact price is yet to be determined, but will be higher than that charged to the Israel Electric Corporation, industry sources told The Jerusalem Post.

Assuming the agreement goes through as planned, this quantity of gas will in effect supply all of Jordan’s energy needs for the next 15 years, sources said.

The 621-billion cubic meter Leviathan gas reservoir, located about 130 km. west of Haifa, is expected to begin flowing in 2017. Noble Energy owns 39.66 percent of Leviathan, while Delek Drilling and Avner Oil – both subsidiaries of the Delek Group – each own 22.67% and Ratio Oil Exploration holds 15%.

Leviathan’s smaller, 282-b.cu.m. neighbor to its east, Tamar, began generating gas for the domestic market in March 2013. At Tamar, Noble Energy holds 36% of the basin. Delek Drilling and Avner Oil Exploration each own 15.625%, while Isramco owns 28.75% and Dor Gas owns 4%.

While the government approved an export policy in June 2013, capping them to 40% of the country’s gas reserves, the question has remained to whom the developers will elect to sell the gas.

Initially, Cyprus and Turkey – the latter of which does not recognize the former’s sovereignty over the entire Cypriot island – were thought to be the most likely contenders to buy gas from Israel. Cyprus has long been courting Israel with proposed joint liquefied natural gas export options, while Turkey suggested doing it through a pipeline. During Operation Protective Edge, however, the Turkish energy minister made clear his country’s “door will be closed” until calm in the region is achieved.

While moving forward with export to Turkey is not impossible, it would necessitate “a major upgrade in the gloomy bilateral relations between Turkey and Israel,” said Dr. Amit Mor, CEO of the Eco Energy consulting firm. Meanwhile, Cypriot LNG opportunities as well as a floating-LNG terminal off Israel’s shores remain viable, he added.

Empty liquefaction plants in Egypt have also become an attractive option for Israeli gas. The British Gas Group signed a non-binding letter of intent with the Leviathan partners that could entail a 15-year supply of 105 b.cu.m. of natural gas to its Idku plant. Meanwhile, in early May, the Tamar reservoir partners signed a letter of intent with Spanish firm Union Fenosa, for the provision of 71 b.cu.m. to that company’s Egyptian liquefaction facility in Damietta.

In January, the Leviathan partners signed their first export deal for the larger basin – a $1.2b. sales agreement with the Palestine Power Generation Company. According to the agreement, PPGC will buy around 4.75 b.cu.m. of gas over 20 years, to fuel a future power plant in Jenin with a 200-megawatt capacity.

A month later, the Tamar reservoir partners signed a $500 million deal to provide 1.8 b.cu.m. of gas to the Jordanian firms Arab Potash and Jordan Bromine over 15 years, beginning in 2016, to power their Dead Sea facilities.

As far as such agreements are concerned for Leviathan in particular, Elliot stressed in his Wednesday statement that the reservoir partners “are making good progress on the marketing side.”

“We now have over 60% of Leviathan’s initial capacity and 80% of targeted initial sales volumes secured with letters of intent,” he said.

National Infrastructure, Energy and Water Minister Silvan Shalom welcomed the signing of the letter of intent between the Leviathan developers and the Jordanian national power corporation.

The signing, the minister stressed, occurred after many meetings held by Shalom and senior ministry officials with various government officials in Jordan. Completion of the deal is subject to the approval of the gas’s export from Israel, which will be made possible after a professional examination and with the final authorization of the minister.

“This is a historic act that will strengthen political and economic relations between Israel and Jordan,” Shalom said. “During this period, the State of Israel has become an energy superpower, which will fulfill the energy needs of its neighbors and will strengthen its position as a major factor in regional power supply – and I welcome that.”

One diplomatic source said Israel has “an important strategic relationship” with Jordan, and “if we can expand cooperation between the two countries, that is a good thing.”

The official called the peace treaty with Jordan “one of the strategic foundations of Israeli foreign policy.” This deal can only help to expand an already “special relationship” with the Hashemite Kingdom, he said.

Mor, the CEO of Eco Energy, likewise stressed that if this deal materializes, it could have far-reaching geostrategic and economic benefits for the region.

It would provide Jordan with relatively cheap natural gas, in comparison to both the LNG that the country is slated to begin importing through Aqaba next year, and the heavy fuel oil and diesel running its power plants right now, Mor explained. Ever since interruptions to the Egyptian gas supply to Jordan and Israel (caused by terrorists in Sinai) began to occur in 2011, Jordan has needed to rely on such fuels, which cost between three and six times more than the anticipated cost of Israeli natural gas, he added.

“The shift to oil in power generation and industry caused a major economic depression in Jordan, due to the increase of $3b.-4b. per year in the cost of energy,” Mor said.

While gas sales to Jordan in the proposed deal would only account for about 4.5% of Israel’s gas reserves, Israel would still see economic benefits from the transaction, according to Mor. The deal would facilitate the financing of the Leviathan project, and 60% of the export revenues would be directed to the Israeli public through taxes and royalties, he explained.

But key is the fact that this letter of intent was signed just after the conclusion of Operation of Protective Edge, which Mor said “demonstrates the strategic alliance between Jordan and Israel.”

“It is 20 years since the [peace treaty was] signed between Jordan and Israel, and there is no doubt that this project is the most important strategic and economic cooperation between the countries,” he continued. “It is also important to stress the courage of King Abdullah of Jordan and of the Jordanian government, which authorized the deal, since he faced vocal opposition from the Jordanian parliament and the Jordanian public, led by the Muslim Brotherhood and fundamentalist groups.”

Mor said he expected binding agreements to be signed with the Jordanian and Egyptian clients in 2015, but reiterated that such steps will require the support of all the relevant governments.

“Together with the two prospective natural gas export projects to Egypt, this economic project emphasizes the establishment of the geopolitical alliance between Israel and the moderate Arab states, led by Egypt, Jordan, Saudi Arabia and other Persian Gulf states, as opposed to ISIS [Islamic State], Hamas and other Islamic extremist parties that are emerging in the region,” he said.

Herb Keinon contributed to this report.

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