Leviathan signs first gas deal at $1.3 billion

Noble Israel says gas could start flowing by end of 2019.

By
January 31, 2016 22:16
2 minute read.
Israel's natural gas

Israel's natural gas. (photo credit: MINISTRY OF NATIONAL INFRASTRUCTURES)

 
X

Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later Don't show it again

In a vote of confidence for Israel’s natural gas market, the consortium developing Israel’s largest gas field Leviathan announced its first sale Sunday, for a whopping $1.3 billion.

Private Israeli power giant Edeltech and its Turkish partner Zorlu Enerji agreed to a contract that would provide 6 billion cubic meters of natural gas to two plants they plan on building: the Tamar power plant, which will power the Haifa Chemicals factory, and the Solad power plant in Ashdod.

Be the first to know - Join our Facebook page.


Development of Leviathan is being led by Texas-based Noble and Israel’s Delek Group, through its units Delek Drilling and Avner Oil and Gas.

Bini Zomer, Noble Energy’s Israel country manager, said that customers could potentially start receiving natural gas from Leviathan by the end of 2019, if a regulatory deal is closed by the end of this year.

A final go-ahead of the controversial gas outline that Prime Minister Benjamin Netanyahu pushed through in December is in the hands of Israel’s Supreme Court, which is expected to decide soon on the deal’s legality after opponents filed an injunction request.

Zomer said in a statement, “With the continued cooperation and mutual commitment of the regulators, the State of Israel and the lease holders, a Final Investment Decision can be achieved by the end of 2016 with the flow of gas to domestic and regional markets within 3-4 years from FID and as early as the end of 2019.”

Any delays could conflict with Edeltech’s plans to have Solad up and running by 2018. However, a spokeswoman said they would purchase natural gas from the active Tamar reserve until Leviathan readies.



Dr. Amit Mor, CEO of the Herzliya- based firm EcoEnergy, which specializes in strategic and financial consulting in the energy field, told The Jerusalem Post, that Edeltech’s contract so early in the game is a good sign for the Leviathan’s future.

The agreement is crucial for financing further development, according to Mor.

“It’s an important sign that a private group shows confidence in the ability to develop the field,” he said, but added that international exports to Egypt, Jordan and Turkey are needed in order to increase the magnitude of the field.

Though the cost to fully develop Leviathan’s 622 bcm reserve is estimated to cost $6b., Mor said that domestic contracts would likely only be able to provide $2b. of that amount. More buyers may come from abroad. Both Jordan and Egypt have signed letters stating their intent to sign agreements to receive natural gas from Leviathan, but have not yet followed through with those plans.

In mid-December, the government and natural gas firms agreed that the price to be paid for natural gas will be linked to the cost of electricity production, as set by the electricity regulator.

Some price possibilities ranged from $4.70 per mmBtu (linked with market changes) to $5.10 per mmBtu (set according to the current global benchmark Brent oil price).

Although the figures announced on Sunday imply an estimated cost of roughly $6 per mmBtu – up to 28% higher than prices mentioned in the earlier scheme – the final price will be linked to the cost of electricity production as set by the regulator. The figures announced in the contract were estimates.

Following news of the deal on Sunday, shares in Delek Group were up 4.7% in afternoon trade in Tel Aviv, while Avner and Delek Drilling stock were both up 4%.

Reuters and Sharon Udasin contributed to this report.

Related Content

Workers strike outside of the Teva building in Jerusalem, December 2017
December 18, 2017
Workers make explosive threats as massive Teva layoff strikes continue

By MAX SCHINDLER