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Giant Israeli Gas Field Partners Ink $3B Supply Deal

Only a day after a deal was reached to allow the stalled development of Israel’s giant offshore Leviathan natural gas field, the project’s American and Israeli partners have signed a US$3-billion supply contract.

On Sunday, the owners of Leviathan—Texas-based Noble Energy and Israel-based Delek Group—signed an 18-year, $3-billion contract to supply a planned power plant, IPM, in Be’er Tuviya, in Israel.

The power plant, according to Israeli media, will have a 430-megawatt electricity production capacity using natural gas power and diesel fuel. The plant is already under construction and under the deal has agreed to purchase 13 billion cubic meters of natural gas over 18 years.

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Discovered six years ago and found to contain a massive 20 trillion cubic feet in reserves, it’s been a rough road for Leviathan, which earlier this month finally got the green light to move forward.

Just over a week ago, the Israeli government approved a revised natural gas development plan.

At issue was a prior pledge from the Netanyahu government, which gave the energy companies a guarantee that they would not be hit with any regulatory or pricing changes for ten years. Israel’s Supreme Court invalidated that clause in March, calling it unconstitutional. Noble Energy warned that the court ruling could delay development.

To comply with the court’s decision, the latest deal removes that controversial provision. But the Netanyahu government also included language in the deal that could lead to compensation to the companies if regulation changes in the future.

This is the second supply deal the Leviathan partners have signed this year.

In January, a Turkish-Israeli power group signed up for US$1.3 billion in Leviathan gas.

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Together the two deals make development prospects much more attractive as it will cost around US$5 billion to get the field into production.

“This deal is an important milestone, in that it establishes another domestic contract that, together with additional domestic and export contracts, are essential for the quick development of Leviathan,” said Niv Sarne, Noble’s manager of business development.

Leviathan is expected to become operation in 2019.

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Noble Energy owns 39.66 percent of Leviathan, while Delek Group subsidiaries Delek Drilling and Avner Oil Exploration each hold 22.67 percent. Ratio Oil Exploration holds a 15-percent share.

By James Burgess of Oilprice.com

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