Israel's NewMed Energy Secures Local Funding for Gas Expansion Project

NewMed Energy LP said Wednesday it has secured new borrowings of up to $400 million from Israeli banks to be used for ongoing operations including an expansion project in the Chevron Corp.-operated Leviathan gas and condensate field.

The one-year credit facilities, which expire October 2025 and mature October 2027, allow Leviathan majority-owner NewMed Energy to draw down up to $200 million from each of the two unnamed lenders.

“The new credit facilities are intended to be used by the Partnership [NewMed Energy] in its ongoing operations, including in connection with Phase 1B of the Leviathan reservoir development plan”, the Delek Group-owned gas and condensate exploration and production company said in a regulatory disclosure.

Phase 1B aims to raise the offshore field’s annual production to up to 742 billion cubic feet (Bcf) a year and expand its export market beyond the Middle East to Europe and Asia.

Leviathan, discovered 2010 off the coast of Haifa city, started production December 2019 under Phase 1A, which can produce up to about 424 Bcf annually. Leviathan “since has become a cornerstone of gas supply in Israel, Egypt and Jordan”, NewMed Energy says on its website.

Under the new loans, NewMed Energy may sell holding rights in the project. “In the Credit Facilities documents, provisions are stipulated in connection with the sale of the Partnership’s holding in the Leviathan project, including the undertaking of the Partnership to reduce the total Credit Facilities, first through cancellation of an unused credit facility (if such exists) and afterwards through prepayment”, the filing stated.

The terms also restrict the issuance of new short-term bonds. “Insofar as the Partnership will issue new short-term bonds in an amount which exceeds $200 million, with a maturity date for an amount exceeding $200 million out of which being before 30 June 2027, the Partnership shall reduce the total Credit Facilities, such that after the reduction, the sum of each of the Credit Facilities shall not exceed $100 million”, NewMed Energy said.

Earlier NewMed Energy said the Leviathan consortium has suspended construction of a third pipeline that will serve Leviathan amid the deepening war in the Middle East.

“Due to escalation of the security situation, the work on laying the subsea pipeline as part of the Third Gathering Pipeline Project has been suspended until April 2025 or thereabouts, depending on the performing contractor's time tables and work schedule, and on the regional security situation”, NewMed Energy said in a regulatory filing October 6.

NewMed Energy expects the delay of the pipeline project, which will grow the gas supply capacity from Leviathan to Israel’s gas grid to about 1.4 billion cubic feet a day (Bcfd), to last about six months.

“Further to the latest developments in the security situation and depending on, inter alia, operational and technical considerations, the Operator, from time to time, halts production from the Leviathan reservoir for certain periods of time, in accordance with the platform's operating instructions and safety procedures”, NewMed Energy told the Israel Securities Authority and the Tel Aviv Stock Exchange. “As of the date of this report, the aggregate harm from the said production halts has not been material relative to the annual production volume”.

Last year, NewMed Energy announced that the Leviathan consortium agreed to invest around $568 million to develop the third pipeline.

NewMed Energy owns 45.34 percent of the 127.4-square mile Leviathan reservoir, which it says is the largest in the Mediterranean. Chevron Mediterranean Ltd., which entered the Leviathan consortium following a merger that gave the United States energy giant full ownership of Noble Energy Mediterranean Ltd. in 2020, owns 39.66 percent. Ratio Energies LP, also an Israeli company, holds the remaining 15 percent.

The new conduit will grow the maximum supply delivered to Israel Natural Gas Lines Ltd. from about 1.2 Bcfd to about 1.4 Bcfd from mid-2025, NewMed Energy said in a filing July 2, 2023.

Leviathan has two operating pipelines stretching a total of 74.56 miles through which output from the project’s four subsea wells is carried to an offshore platform that processes the gas.

To contact the author, email jov.onsat@rigzone.com