Leviathan looms

Sarah Parker Musarra

January 1, 2015

Sarah Parker Musarra examines Israel’s Leviathan field’s potential and separates fact from misconception.

The Tamar field, which was turned around from discovery into production in only four years. Beagelman points to this as proof positive that Israel has the proper infrastructure in place to support its growing offshore sector.
Photo from Albatross Aerial Photography Ltd.


When the first gas discoveries were made offshore Israel in 1999-2000, Israel was thrown into the international energy spotlight.

Initial offshore oil and gas discoveries were Noa in 1999 and Mari-B, in 2000. Operator Noble Energy announced first gas from Mari-B, the larger of the two fields, on Christmas Eve 2003. But, more was to come. The 1 Tcf (gross reserves) Mari-B field gave way to the 10 Tcf (gross reserves) Tamar field, which was touted as the largest deepwater natural gas discovery in the world, at the time in 2009. Just four years later, Tamar was onstream.

The pace – and scale – did not slow. In 2010, less than 30mi from Mari-B, Noble Energy found the Leviathan field, dwarfing Tamar with an estimated 22 Tcf gross mean natural gas resources – the largest discovery in Noble’s history.

All four finds are in the Levant basin, which is estimated by the US Geological Survey’s (USGS) 2010 report to have about 1.7 billion bo undiscovered recoverable and about 122 Tcf of undiscovered gas. Noble expects Leviathan’s Phase 1 to be ready for production by 2018.

In December 2013, Noble Energy announced that it encountered approximately 355ft of net natural gas pay in the Tamar SW well, 8mi southwest of the Tamar field, in 5400ft water depth, marking its eighth consecutive discovery in the Levant Basin. 

“Due to lack of information, there is not enough focus on the further opportunities offshore in Israel. The industry recognizes now the huge discoveries and production levels, however, there is not enough knowledge about the further exploration opportunities in Israel’s offshore deepwater. The geology spells it out,” says Joshua Beagelman, COO of Universal Oil and Gas (UOG), the organization which brought Israel its first international oil and gas conference in 2014. “There will be more natural gas discoveries in Israel and oil discoveries–it just depends who will take the leap.”

Catarina Podevyn, content analyst for Infield Systems, said that Israel is driving offshore spend in the region, holding a 25% share of the central Mediterranean’s forecast offshore capex throughout 2015-2019. Noble Energy alone is predicted to pump an 84% share of forecast capex off Israel during the same period. 

“There should be a queue of operators focused on Israel,” Beagelman says. “Especially when you look to Cyprus, who [has] not produced anything as of yet, and you have three major operators exploring in their waters.” 

Like many developing regions, the Israeli offshore sector has had its share of naysayers and even doomsayers, particularly when it comes to bringing Leviathan online. The general political unrest in the region might contribute to some general unease among investors; that certainly seemed the case when the Financial Times and others reported on tumbling economic activity within the country, as the conflict with Hamas in the Gaza Strip continued.

Security concerns are high on the agenda, but can be a misconception, Beagelman says. Professor Brenda Shaffer, an expert in international energy, based at Georgetown University, says Israel handles security of energy infrastructure differently than other countries. “In contrast to places where the companies take on the security [of the assets], in Israel, the government, through the Navy, has taken on most of the security concerns,” she says. “I don’t really think that’s really a factor.”

The deck of the Tamar platform, shown in 2012, while under construction.
Photo from Noble Energy.


“In terms of its assets, Israel has a long history of protecting its assets very successfully,” Beagelman says. “If you compare Israel to its current competitors (other emerging oil markets), there is no comparison – Israel is already deploying ‘iron dome’ technology for its naval ships and is one of the safest places to be offshore.”

Still, the Leviathan development is going ahead. Podevyn says that much of Noble Energy’s Israeli capex is earmarked for Leviathan, which is itself expected to amount to 69% of Israel’s offshore capital expenditure in 2015-19, with peak spending in 2019.

Leviathan, which received its name from a giant sea monster in the Bible’s Old Testament, is in the Mediterranean Sea, about 130km from Israel’s coastline, in about 1600m water depth. It is one of the largest offshore discoveries in the past decade.

The field’s consortium submitted what Reuters reported to be a US$6.5 billion initial development plan for Phase 1 of the field to the country’s Ministry of National Infrastructures, Energy and Water Resources in 2014. Phase 1, expected by Noble and partners to start up in late 2017/early 2018, will include an FPSO with a capacity of 1.6Bcf/d, which BW Offshore announced that it was in FEED to provide.

Phase 2 expansion options being assessed include regional pipeline sales, FLNG, and Cyprus onshore LNG options, according to Noble in a late 2014 presentation at the Johnson Rice Energy Conference.

One question mark about the project is its ability to become a major export project and, if so, to where, says Shaffer. “It’s still a big field by itself, but in terms of how much gas is available for export, there’s maybe 250-300 Bcm available for export. That’s not a game-changer for Europe, for Asia,” she says.

Shaffer says that the size of Leviathan’s resources, the amount of infrastructure, and the market needs within the area bordering Israel are a perfect match. She does not see Europe or Asia as likely export markets, despite an Israeli vision to export to Europe via a new pipeline. She points out that globally expensive gas exports are facing current market pressure.

Keith Elliott, Noble Energy’s Senior Vice President, Eastern Mediterranean Natural, shared a similar perspective with OE, saying: “Gas from these developments [Tamar and the first phase of Leviathan] could add tremendous economic value to Israel and other countries in the region in the form of revenues, fuel costs savings and enhanced environmental quality.”

The Leviathan consortium currently has two letters of intent (LOI) in pace: One signed in June to export up to 3.75 Tcf of natural gas over a 15-year period to the UK major BG Group’s LNG plant in Idku, Egypt, and a September US$15 billion preliminary deal to supply a base gross quantity of 1.6 Tcf of natural gas over a 15-year term with Jordan’s National Electric Power Co. (NEPCO).

“We now have over 60% of Leviathan’s initial capacity and 80% of targeted initial sales volumes secured,” Elliot said in a statement announcing the NEPCO LOI. In Noble Energy’s November 2014 Investor’s Information, the company said that it was negotiating towards final agreements, and that it remained focused on “domestic and regional customers.”

Noble Energy operates Leviathan with a 39.66% stake. Its partners include Delek Drilling (22.67%), Avner Oil Exploration (22.67%), and Ratio Oil Exploration (1992) Ltd. Partnership (15%).