(Bloomberg) -- Israel’s natural gas companies and Noble Energy Inc. have signed the first contract to supply fuel from the country’s largest gas reserves, the offshore Leviathan field.
Partners in Leviathan will supply 6 billion cubic meters of gas over 18 years to two power stations owned by local electricity producer Edeltech Group, according to a statement filed to the Tel Aviv Stock Exchange. Under a government program for the country’s gas industry approved last month, Leviathan will be developed by Texas-based Noble with Delek Drilling LP and Avner Oil Exploration LP, units of Israel’s Delek Group Ltd.
“This deal marks a beginning. We are advancing more agreements with customers in Israel, Jordan, Egypt and Turkey,” Yossi Abu, Delek Drilling’s chief executive officer, said in an e-mailed statement. “Development of the Leviathan field will ensure Israel’s energy security and gas export contracts from the site will strengthen the country’s geopolitical position in the region.”
Prime Minister Benjamin Netanyahu said last week that he is examining the possibility of a pipeline to transport gas to Europe via Greece. The Leviathan partners agreed in November to enter non-binding negotiations with Dolphinus Holdings Ltd. in Egypt to supply as much as 4 billion cubic meters of natural gas annually for a period between 10 and 15 years. Dolphinus is a consortium of large, non-governmental gas consumers and distributors headed by Egyptian businessman Alaa Arafa.
“Noble believes that the Leviathan project can move forward based on domestic and export opportunities,” despite the challenges faced by the global oil and gas industry, Bini Zomer, the Israel country manager of Noble Energy, said in an e-mailed statement.
Benchmark European gas prices fell 31 percent last year as the fuel has struggled to compete against more profitable coal. The price of the cleaner fuel in Europe will probably fall further as cold weather ends and oil’s slump feeds into long- term contracts, Societe Generale SA said in a Jan. 12 note. Benchmark Brent crude tumbled 35 percent in 2015 and dropped a further 6.8 percent this year.
Noble expects a final investment decision on Leviathan to be made by the end of 2016, Zomer added. The flow of gas to domestic and regional markets is set to begin within three to four years from the decision and as early as the end of 2019, he said.
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