(Reuters) - Noble Energy Inc (NBL.N) slashed the risks to its colossal Israeli natural gasproject by selling a stake to Australia’s largest oil producer and sealing a crucial supply deal with a Palestinian power company in one of the world’s political flash points.
Both steps, carefully choreographed over the past month, should help Noble achieve its goal of doubling production by 2018 and mitigate Wall Street’s fears about the company’s prospects in the politically unstable region.
In a deal worth $2.55 billion in cash and future revenue, Australia’s Woodside Petroleum (WPL.AX) agreed last week to help Houston-based Noble Energy and three Israeli companies develop the offshore natural gas field Leviathan. The field, along with smaller ones nearby, holds nearly 40 trillion cubic feet of natural gas, the same amount consumed each year in the United States.
The deal came a month after the Noble Energy consortium signed a $1.2 billion contract to begin supplying natural gas to the Palestine Power Generation Co. in a couple of years.
The group is already shipping gas to Israel from a small field near Leviathan, meaning Israel and the Palestinian Authority will both rely on the same source for natural gas.
Woodside’s experience in liquefied natural gas (LNG) projects will help regional exports begin sooner. Selling to a broad range of neighboring countries should reduce the project’s appeal as a target for attacks, security analysts say.
In a sign of how vital the natural gas is to Israel, its military patrols the seas above the deposits to defend against any potential attacks.
The company decided potential risks of developing the fields amid the geopolitical turmoil were acceptable considering the probable rewards, said a well-placed source who declined to be named, citing a policy of not speaking to the media.
“When you think of Middle East conflicts, Israel really is in the best place in terms of risk,” said the same source, who is close to the company’s board of directors.
Noble will remain the project’s operator after the Woodside deal closes later this year, holding 30 percent to Woodside’s 25 percent. The other three partners – Delek Group (DLEKG.TA), Avner Oil & Gas Exploration (AVNRp.TA), and Ratio Oil Exploration (RATIp.TA) – will each hold less than 17 percent.
For Noble, the enormous offshore project in foreign waters is one it must undertake, analysts and investors say, if it hopes to replenish declining reserves faster than fellow rivals such as independent energy producers Marathon Oil Corp (MRO.N), Anadarko Petroleum Corp (APC.N), and Apache Corp (APA.N).
Noble first began operating off Israel’s coast in 1998, but it was not until 2010 that Leviathan was discovered. The company recently said there could be large oil deposits near the formation as well.
The cost to produce natural gas in the Mediterranean is only slightly less than market prices in much of Europe right now, suggesting that Asia – where prices are double Middle Eastern production costs – could be an attractive export opportunity.
That global export potential helped lure Noble and its partners to Woodside in the first place, given the Australian company’s LNG expertise.
Indeed, Noble Energy Chief Executive Chuck Davidson flew to Perth last month to negotiate with Woodside, which agreed tentatively to the deal in late 2012, then cooled to the idea when it was unclear whether Israel would allow LNG exports.
Noble and its development partners fought aggressively for the right to export 40 percent of the natural gas in Leviathan and nearby fields, winning that right late last year in a decision from Israel’s supreme court.
“You knew that Israel would be pragmatic about negotiations with Noble Energy on this,” said Tim Rezvan, an energy analyst at Sterne Agee. “Leviathan is too important for the country as it works to produce more energy locally.”
Expectations are high on Wall Street, where Noble Energy’s shares have sagged in the past three months amid a dip in the price of crude oil and rising production costs. At current estimates, Leviathan is expected to begin operations in 2017.
“Assuming the project comes online, it’ll be a big part of the pie at Noble Energy,” said Rezvan.
To be sure, Noble is still investing aggressively in its United States onshore shale operations, planning to spend 70 percent of its $4.8 billion capital budget this year on projects in Colorado’s Denver-Julesburg Basin and the Pennsylvania Marcellus formation.
But it’s spending the remainder of that budget on deepwater projects in the Mediterranean and elsewhere, and hopes to use cash flow, not debt, to finance future Israeli expansion.
“The continued demand for our gas in both Israel and other regional areas combined with the potential for multiple LNG or FLNG solutions sets us up for some dramatic growth in this region over the next decade or longer,” David Stover, Noble Energy’s president, told investors early last week.
A rare snowstorm in Jerusalem in December sharply increased natural gas demand, giving investors a hint of the project’s longer-term potential. Many Israeli power plants had to temporarily switch from coal to natural gas to produce power.
That storm helped Noble Energy’s fourth-quarter sales volumes jump 16 percent.
“This whole region has a lot of potential due in part to the size of these energy reserves,” said Emre Tuncalp of Sidar Global Advisors, a geopolitical risk advisory firm that specializes in energy matters. “Given all the components that need to come together to develop this area, I think it’s moving forward pretty well.”
The discovery well was drilled to a depth of 19,225 feet in water depth of about 5,540 feet. Results from drilling, formation logs and initial evaluation work indicate an estimated gross resource range(1) of 5 to 8 trillion cubic feet (Tcf), with a gross mean of 7 Tcf. The Cyprus Block 12 field covers approximately 40 square miles and will require additional appraisal drilling prior to development.
Charles D. Davidson, Noble Energy’s Chairman and CEO, said, “We are excited to announce the discovery of significant natural gas resources inCyprus on Block 12. This is the fifth consecutive natural gas field discovery for Noble Energy and our partners in the greater Levant basin, with total gross mean resources for the five discoveries currently estimated to be over 33 Tcf. This latest discovery in Cyprus further highlights the quality and significance of this world-class basin.”
Noble Energy operates the well with a 70 percent working interest. Delek Drilling and Avner Oil Exploration will each have 15 percent, subject to final approval by the Government of Cyprus.
Since its massive natural gas discovery in the Leviathan field offshore of Israel, Noble Energy has suspected that commercial oil reserves may lie beneath the gas find. Plans to begin oil drilling in Leviathan’s two lowest strata have been delayed for a month due to technical concerns.
In a March 11 interview with Israeli news agency Haaretz, Epsilon Investment House energy analyst Ron Alkon stated, “A month’s postponement of the results isn’t, in itself, a sign that there is no oil. Since it is almost without precedent to be drilling for oil at these depths, and to avoid environmental problems and other possible malfunctions, they are taking their time to be prudent. It shows that there is still a considerable chance of finding oil. Just the fact that they intend to invest an additional $40 million in advance shows that the possibility is there.”
The Haaretz article continues:
“Drilling from the Sedco Express platform at Leviathan 1 has reached a depth of 5,100 meters – to the first layer of sand where advanced geological testing was performed in discovering natural gas.
“The next stage is drilling 700 meters further, to the layer geologically referred to as the Lower Oligocene Age, where Noble estimates an average economic potential for usable oil reserves of about 3 billion barrels at a geological probability of 17%.
“After this stage the partners intend to drill deeper still to test another prospect at a depth of 7,200 meters. Here Noble estimated the economic potential at equivalent to 1.2 billion barrels of oil, but at a mere 8% probability.”
Noble’s oil exploration drilling into these strata is expected to commence in early May.
In case anyone missed it last summer, oil has been discovered in Northern Israel. We’re not waiting for an oil discovery – it’s already happened! The oil has been/is being produced and sold. What’s more, the exploration company, Givot Olam, based its search for oil in Israel on Scripture. That’s right, oil has been discovered in Israel, based on Bible passages predicting the discovery and its location. The same Bible (Torah) passages used by my father, Jim Spillman, back in 1981 in his book, The Great Treasure Hunt. The same passages Zion Oil & Gas Founder John Brown heard Dad teach on a Zion Temple in Michigan thirty years ago and took to heart. Included Jacob’s Blessing, recorded in Genesis 49 and Deuteronomy 33, is the prophecy of a last days oil discovery. Jacob’s descendants will be blessed from the “deep that coucheth beneath”; “for the chief things of the ancient mountains, and for the precious things of the lasting hills, and for the precious things of the earth.” Issachar and Zebulun “shall suck of the abundance of the seas and of treasures hid in the sand.” Asher will “dip his foot in oil.”
The prophecy of oil in Israel isn’t going to be fulfilled someday – it is being fulfilled as we watch!
A January 13 Globes Article follows progress at Givot Olam’s Meged 5 well site; I’ll share a few excerpts here:
“Givot Olam Oil Exploration LP (TASE:GIVO.L), which is currently fracing (hydraulic fracturing) sections of its Meged 5 well and carrying out production tests, is seeking to cool investors’ enthusiasm after yesterday’s flare at the wellhead, which indicates the presence of fuel at the well. The scale of production, if any, is unknown, but the flare is a routine procedure during production tests.”
“A few months ago, Givot announced that production tests conducted during the summer produced an average of 382 barrels of oil a day. Fracing is now underway in sections 1-6 of the borehole to speed up the production rate, and production tests are underway of sections 7-8.”
“Givot sold 6,000 barrels of oil produced during last summer’s production tests to Oil Refineries Ltd. (TASE:ORL) at the below market price of $60 per barrel. It cannot be ruled out that oil currently being produced is also being sold to Oil Refineries, and is why there are oil tankers at the wellhead. However, how much oil is being sold is not known.”
“A capital market source close to the matter told “Globes”, “When you peel away all the conduct of the past year, Meged 5 ultimately has something real.”
Givot’s Meged 5 is just the beginning of onshore oil discoveries in Israel. I believe Givot will drill more and produce much more in their Meged oil field.
Zion Oil & Gas, just to the north of Givot Olam, controls 327,000 acres of exploration territory and is in the final stages of drilling their fourth well, the Ma’anit-Joseph #3. In just weeks, Zion will be at its final depth of 19,000 feet.
With Israel’s recent gas discovery, the country is now staged to be natural gas independent (natural gas now powers some of Israel’s power plants and by the end of the decade, most likely, all electrical generation will come from natural gas fired plants). Noble Energy, one of the exploration partners on the gas discovery says they believe substantial oil reserves are under the gas fields.
Israel now has enough natural gas to supply its needs into the foreseeable future and for export. With the ongoing operations of Givot Olam, Zion Oil & Gas, Noble Energy can oil independence for Israel be far behind? I don’t think so.
What do you think?
Investors should be cautious and differentiate between concepts and reality, says chairman of gas explorer.
By Eytan Avriel Haaretz
The probability that natural gas will be found in the deepwater prospects being explored by Noble Energy and Delek Group – the Leviathan prospect – is 10% to 15%. That is a probability, which by definition does not mean “sure thing.” However, says Charles Davidson, CEO of Noble Energy, he hesitates to talk about the prospect because some people in Israel relate to announcements of potential as though they were announcements of actual discoveries.
“That worries me,” he said on a panel on oil and gas exploration at a conference of the Tel Aviv Stock Exchange in London on Thursday: Oil exploration is a high-risk business.
What Noble does, Davidson said, is manage risk in a portfolio of opportunities. Investors should be cautious and differentiate between concepts and reality. Reality is the gas discovered at Tamar.
At the lowest part of the areas the partners looked at, there is the potential of oil, but – Davidson stressed – that doesn’t mean there is oil there. It has never been tested.
Systems of the type down there can produce oil, Davidson said, but one has to check whether a reservoir of trapped liquids of the type is actually there.
Gideon Tadmor, CEO of Delek Energy, fielded a question about the difference between investment in fossil-fuel exploration for the long-term, and as a speculative investment. In his view the difference lies in the company’s diversification: picking a company involved in one project is speculative. The more projects the company has, the better it is, Tadmor said.
One also has to check the company’s ability to actually do the job, Davidson added. For instance, to drill at Tamar, the partners had to bring in a rig from Africa. By the time the exploration was done, the cost had reached $300 million. Not every company could pull off a job like that.
On the geopolitical risk of drilling in Israeli territorial waters, given claims by Lebanese and Cypriot elements that they own a share, Davidson said Noble employs companies that analyze risks unrelated to the actual drilling, and in their opinion, Israel ranks well. Noble has been working in Israel for 12 years, Davidson said; obviously it feels comfortable about it.
“There are areas more problematic than Israel,” Tadmor added; Israel is relatively safe. “I see no geopolitical risk in our explorations.”
(AFP) BEIRUT — Lebanese parliamentary speaker Nabih Berri on Wednesday urged his government to begin exploring offshore natural gas reserves, warning that neighboring Israel planned to lay claim to the prospective resources.
“Lebanon must take immediate action to defend its financial, political, economic and sovereign rights,” said Berri, who has submitted a bill to launch exploration of potential offshore reserves.
“Exploring our options in this field is our best bet to pay off Lebanon’s debts,” he told reporters.
Lebanon’s national debt, among the highest in the world, currently stands at more than 50 billion dollars (41.6 billion euros), equivalent to some 148 percent of GDP.
“Israel is racing to make the case a fait accompli and was quick to present itself as an oil emirate, ignoring the fact that, according to the maps, the deposit extends into Lebanese waters,” he said.
In a statement on its website, Norway-based Petroleum Geo-Services recently announced it had explored Lebanese waters which contained “valuable information” on potential offshore gas reserves in coordination with the Lebanese energy and water ministry.
And US-based Noble Energy said on its website that it had discovered enough natural gas at the Israeli Tamar and Dalit offshore fields to meet Israel’s needs for years.
It also announced the Leviathan prospect, offshore Israel in the Rachel and Amit licenses, as its next planned exploration target in the region in the fourth quarter of 2010.
Lebanon and Israel remain technically in a state of war and have no diplomatic ties.
Source: Jewish Herald Voice
Houston-based Noble Energy will be honored at a tribute dinner Sunday evening, May 23, at the Westin Galleria Hotel for its discovery of significant natural gas resources off the coast of Haifa – discoveries that will have “profoundly positive” benefits for the State of Israel. Leon Mucasey, general chairman, Houston Committee State of Israel Bonds, made the announcement with Fred Zeidman, Texas chairman, State of Israel Bonds. On this occasion, the energy company’s chairman and CEO Charles D. “Chuck” Davidson will accept the State of Israel Bonds Declaration of Independence Award on behalf of Noble Energy.
“The natural gas discoveries Noble Energy and its Israeli partners have made have profoundly changed the State of Israel’s security situation for the better,” Mucasey stated. “These natural gas discoveries are believed to be big enough to supply Israel’s energy needs for at least two decades or more, so that Israel will no longer have to be dependent on imported oil. The Declaration of Independence Award is a truly appropriate award to bestow upon Noble Energy, as it has put Israel on the road to energy independence,” Mucasey concluded.
The culmination of years of significant study of a previously, highly underexplored region, and of investment, the Tamar discovery was drilled by Noble Energy and its Israeli partners Isramco Negev 2, Delek Drilling, Avner Oil Exploration and Dor Gas.
It was drilled in the Matan License, offshore Israel, in approximately 5,500 feet of water and was drilled to a total depth of 16,076 feet to test a lower Miocene subsalt structure in the Levantine Basin. It was characterized by Davidson as “one of the most significant prospects we have ever tested,” and as “the largest discovery in the company’s history.”
Further testing and appraisal of the discovery has identified natural gas resources of 6.3 trillion cubic feet, enough to supply Israel’s energy needs for at least two decades or more. Noble Energy and its partners are moving forward with plans to bring first production from Tamar to Israel by 2012.
A publicly traded company listed on the New York Stock Exchange, Noble Energy is a leading independent energy company, which has been engaged in the exploration and production of oil and gas since 1932. The company operates primarily in the Rocky Mountains, Mid-Continent and deepwater Gulf of Mexico areas in the United States, with key international locations in Equatorial Guinea and Israel.
The State of Israel Bonds tribute to Noble Energy will begin with a reception at 6 p.m., followed by dinner and the formal program at 7 p.m. Dietary laws will be observed. Dress is business attire.
An RSVP is required. For information, call State of Israel Bonds Texas Headquarters at 713-729-3100 or 800-676-3101.
The United States Geological Service released a report last week on Israel’s Levant Basin, stating that the area contains 1.689 billion barrels of undiscovered oil and 122.4 trillion cubic feet of undiscovered natural gas. The Levant Basin lies both onshore and offshore and includes most of middle and northern Israel and coastal Lebanon and Syria. The basin includes the exploration areas of Noble Energy offshore and Zion Oil & Gas onshore.
Although the USGS released its report just last week, most of the data it contained came from research conducted between 2000 and 2008 by Dr. Michael Gardosh, a researcher at the Geophysical Institute of Israel, and Dr. Yehezkel Druckman, who until a few years ago was Petroleum Israel’s Commissioner. Dr. Druckman now serves on the Zion Oil & Gas Board of Directors.
Noble Energy chairman and CEO Charles Davidson expressed optimism that there will be more gas fields discovered at a press conference in Tel Aviv today.
He said, “We conducted a 3D seismic survey, which will provide very sophisticated information enabling us to know whether there are more reservoirs. We believe that there are other reserves adjacent to the Tamar and Dalit reservoirs. We’re now analyzing the results of the seismic survey. I hope that we’ll continue to find natural gas in this country. I’m optimistic about more reservoirs, whether at Leviathan or elsewhere.”
Davidson added, “Israel was the land of milk and honey in Biblical times, but in the modern era, its milk and honey and natural gas. In Israel’s deep waters, in virgin territory, a monster natural gas discovery has been made.”
Noble Energy Inc. (NYSE: NBL) is a partner in the Tamar and Dalit offshore gas fields, together with Delek Group Ltd. (TASE: DLEKG) subsidiaries Delek Drilling LP (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L), Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), and Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) subsidiary Dor Alon Energy Exploration Ltd. It is also a partner with Delek Group in the Yam Tethys partnership, which owns a natural gas field offshore from Ashkelon, and in the Leviathan prospect, west of Tamar, with Delek Group Ratio Oil Exploration (1992) LP (TASE:RATI.L).
Noble Energy convened the press conference at the Tel Aviv Hilton not only to wax poetic about biblical Israel, but to outline its program to develop its natural gas reserves in Israel. Investors are eager for any scrap of information about the Leviathan lease, where 3D seismic survey is underway, whose results are due later this month. If gas is found, the prospect’s partners will begin drilling toward the end of the year, at an estimated cost of $100 million.
Davidson said, “The company expects to drill into another large structure during the second half of the year, and to drill in the two discoveries already made during 2011.”
The statement reiterates what Noble Energy said in the conference call following the publication of its financial report for 2009 last month, without explicitly mentioning “Leviathan”. “As for Tamar, the immediate challenge is to reach an agreement with the government on how to bring the gas to shore, since seafront real estate in Israel is very expensive. One possibility is to build a new terminal, another is to use Yam Tethys’ existing infrastructure,” Davidson said.
Davidson promised that the company would meet its timetable for the Tamar well. The well’s partners are due to publish their development plan for the reservoir in the second half of the year. The plan will reportedly cost more than $2.6 billion, with gas production beginning in early 2012.
“We’ve been here for over ten years already,” said Davidson. “Noble Energy won’t be here for years, but for decades. I can’t imagine a better place to be than here.”
Noble Energy will invest $140 million in gas exploration in Israel in 2010, almost 10% of its budget.
Shares of Israeli gas and oil exploration partnerships on the Tel Aviv Stock Exchange (TASE) have skyrocketed by hundreds and even thousands of percent in the past year, as investors seek the next Isramco. Davidson, however, sends a clear message to investors: Be careful. “Oil and gas exploration shares were hyped last year, and I urge caution,” he said. “There is no sure thing in the energy industry, and in the end, only a few companies will succeed. There’s an upside potential in the shares of Noble Energy. I’m a long-distance runner, and I don’t comment about the market’s response over the next week or two. We’re managing projects that will last us decades. In this business, you don’t plan for days, but for the long haul.”
Published by Globes [online], Israel business news – www.globes-online.com
The company plans to resume exploration in the Eastern Mediterranean.
Oil and gas exploration company Noble Energy Inc. (NYSE: NBL) will invest $530 million in natural gas exploration in Israel and in development of its current reserves at Yam Tethys and Tamar, said company executives during a conference call on Friday.
During the conference call, which followed the publication of Noble Energy’s financial report for the fourth quarter of 2009, Noble Energy chairman and CEO Chuck Davidson said, “Late in the year, we anticipate resuming exploration in the Eastern Med, looking to build on our tremendous success that we’ve had already there in Israel.”
The reference is to economic zones of Israel and Cyprus, probably at the company’s Leviathan license, west of Tamar. Leviathan is jointly owned by Noble Energy, Delek Group Ltd. (TASE: DLEKG), and Ratio Oil Exploration (1992) LP (TASE:RATI.L). Drilling will probably begin after the recently completed 3D seismic study of the strata structure is analyzed.
Noble Energy said that its capital program in 2010 will total $2.5 billion, $1 billion for major projects, most of which will be directed to projects in the Gulf of Mexico, Equatorial Guinea in West Africa, and Tamar.
Noble Energy said that natural gas sales in Israel were 25% lower in 2009 than in 2008. Sales are from the Yam Tethys field offshore from Ashkelon, in which Noble Energy owns 47.1%, with Delek (4.44%) and its subsidiaries Avner Oil and Gas LP (TASE: AVNR.L) (23%) and Delek Drilling LP (TASE: DEDR.L) (25.5%) owning the rest.
Davidson said, “Internationally, we had tremendous exploration success in Israel, with our largest discovery ever at Tamar and subsequent Dalit find. We announced signed letters of content covering $10.5 billion in gross expected revenue, with less a third of resources committed. And we immediately moved forward with the development plans that should lead to the sanction of Tamar this year.”
The Tamar partners today announced that they have signed a third letter of intent for the sale of natural gas to Dimona Silica Industries Ltd. The 17-year contract is worth $500 million. Noble Energy owns 36% of the Tamar prospect, alongside Delek Drilling, Avner Oil, Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), and Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) subsidiary Dor Alon Energy Exploration Ltd.
Noble Energy attributed the lower than expected natural gas sales in Israel to warmer than normal weather, increased imports of competing Egyptian gas (from East Mediterranean Gas Company (EMG), which began deliveries in early 2009), and because the company’s customer, Israel Electric Corporation (IEC) (TASE: ELEC.B22) had some downtime on one of their power plants.
Investment house Barclays Capital reiterated its “Overweight” rating on Noble Energy stock, and kept its target price for the share at $84. However, it cut its earnings per share estimate as production guidance figures ranged lower than Barclays analysts had expected. They nevertheless maintain that strong future production growth, beginning in 2012, will support the shares.