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Noble, Delek Mull Over New LNG Terminal

Noble Energy and Delek Drilling, the operators of the Leviathan offshore gas field in Israel, may add a floating LNG export terminal to their project if it proved commercially viable, S&P Global Platts reports, quoting the Israeli company.

"Liquefying the natural gas from Leviathan will enable us to transport it worldwide, thus reaching new export markets, mainly in Europe and in Asia," Delek Drilling’s chief executive Yossi Abu.

If the partners decide to go ahead with a floating LNG facility, this would add to growing LNG export capacity that has already pressured international prices by creating excess supply, and has made it harder for some industry players to find the funding they need to build their LNG terminals.

Yet the Leviathan facility would not be among the largest ones, it seems. For now, Noble Energy and Delek are considering an annual capacity of between 2.4 and 5 million tons of LNG. To fund the project, the two would rely on a long-term charter contract with an LNG shipping company—Golar LNG or Exmr—and the company will undertake the funding, construction, and operation of the floating facility.

A recent report by RBC warned that the global glut in natural gas, including LNG, will remain until the middle of the next century as the United States continues to increase production and large-scale LNG projects in other parts of the world begin commercial production.

China is expected to become the world’s top LNG importer within the next five years, just as the U.S. becomes the largest exporter by 2024, with annual exports of over 100 billion cubic meters in that year. That, however, would only work out with stronger LNG prices and an end to the trade war that has stumped some LNG ambitions because of the lack of long-term import commitments, notably from Chinese importers.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on July 31 2019 said:
    This could prove to be unviable economically for the following reasons. The first is that the annual capacity ranging from 2.4-5.0 million tons is too small to justify adding a floating LNG export terminal at the Leviathan offshore gas field in Israel.

    The second reason is that there exists LNG plants and capacity in neighbouring Egypt at Idku and Damietta. There is also the advantage of the proximity of Israel’s offshore gas installations to Egypt. Shipping Israeli natural gas to Egypt for converting into LNG and then re-exporting along Egypt’s LNG to the Asia-Pacific region could prove to be a better and more cost-effective option.

    The same logic applies to the proposed EastMed gas pipeline that is supposed to transport Cypriot and Israeli gas supplies under the Mediterranean to Italy and then the European Union (EU) via the Greek mainland.

    The EastMed may never see the light of day. It seems that the EastMed which is to stretch over a distance of 1900 km and cost an estimated $7 bn is all but dead. Cyprus has not yet discovered any sizeable gas fields like Egypt’s Zohr (30 tcf) and Israel’s Leviathan (18.9 tcf) with the exception of two relatively small gas fields: the 6-8 tcf Calypso and the 4.5 tcf Aphrodite. If we are to judge the viability of the EastMed on the current situation, there is only Calypso and Israel to fill the pipeline. Israel has already signed a deal worth $15 bn of Israeli gas exports to be sent to Egypt for conversion to LNG and re-exporting. Cyprus on its own couldn’t muster enough gas exports to fill the EastMed throughput capacity of 20 bcm per year.

    Moreover, Turkey will never allow the Greek Cypriots to produce gas let alone export it without securing a share for the Turkish Cypriots. The other obstacle is that the price of shipped gas via the EastMed pipeline couldn’t compete with Russian piped gas to the EU once production costs and shipping have been added.

    The claim that the United States will become the largest exporter of LNG by 2024 is hype as US LNG projects are dependent to a great extent on long-term import commitments, notably from Chinese importers and also Chinese finance. Moreover, Qatar will be having the world’s largest production and export capacity at 110 million tons by then thus consolidating its status as the world’s largest producer and exporter of LNG.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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