Leviathan partners raise $1.75b. from international lenders

The partners signed the financing agreement with a consortium of about 20 international and Israeli lenders, led by J.P. Morgan Limited and HSBC Pank Plc.

February 21, 2017 17:30
2 minute read.
tamar gas

Tamar gas field‏. (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)

In a key step toward furnishing Israel and its neighbors with a robust natural-gas supply, the Leviathan reservoir partners have secured $1.75 billion in loans for the basin’s development.

The partners signed the financing agreement with a consortium of about 20 international and Israeli lenders, led by J.P. Morgan Limited and HSBC Bank PLC, according to a report submitted to the Tel Aviv Stock Exchange on Tuesday morning. The funds are expected to support the A1 development stage of the Leviathan project.

Once developed, the 613-billion- cubic-meter Leviathan gas reservoir – located about 130 km. west of Haifa – is expected to not only boost domestic gas supplies, but also to serve as an export outlet for Israel’s immediate neighbors and the wider Mediterranean region.

Houston-based Noble Energy holds a 39.66% share of the Leviathan reservoir, while the Delek Group’s subsidiaries Delek Drilling and Avner Oil each have 22.67% and Ratio Oil Exploration has 15%.

“The financing transaction is a breakthrough for mega-infrastructure project financing in the Israeli economy and is a further vote of confidence by the international and Israeli financial bodies, led by HSBC and J.P. Morgan, in Delek Drilling and Avner generally, and in the Leviathan project specifically,” said Yossi Abu, CEO of Delek Drilling and Avner Oil Exploration. “The Leviathan project is today taking a significant leap forward.

We will continue to act in order to pipe gas from Leviathan to the Israeli market and for export already in late 2019.”

While the Leviathan reservoir partners are still exploring their export options, looking potentially to the European market via Turkey and Cyprus, they have already solidified one agreement with Israel’s neighbor Jordan. In September, the partners signed a $10b. deal to supply Jordan’s National Electric Power Company Ltd. with 45 b.cu.m. of gas over a 15-year period.

The development of the Leviathan reservoir faced significant setbacks in recent years, when the country’s disputed natural-gas “outline” all but froze Israel’s hydrocarbons sector from December 2014 to the beginning of 2016. The goal of the deal was to ensure competition in the sector and settle disagreements among the country’s developers, the government and the antitrust commissioner.

While the Leviathan basin was initially slated to flow to Israel’s shores by 2017 or 2018, as a result of the prolonged negotiations Leviathan’s developers now estimate that the basin will begin providing gas in 2019.

Following the Leviathan partnership’s announcement on Tuesday regarding the development financing, Prime Minister’s Office director- general Eli Groner described the investment in the Israeli energy sector as “good news for our economy.”

“Today we have moved another significant step forward on the path toward realizing the gas outline and toward creating energy security for the citizens of Israel,” he said, during a tour of the Noble-Ruppin Center for Energy and Natural Gas on Tuesday morning. “The government’s current challenge is introducing natural gas to all sectors of the economy, to maximize the economic and environmental benefits for the general public.”

Critical to government’s vision for the country’s energy sector was the expectation that the companies developing the gas fields would contribute to the Israeli economy, employment and academic partnerships, Groner explained.

“I am happy that we have reached the stage in which this vision is being fulfilled before our eyes,” he said.

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