Will Israel be energy independent soon?

November 30, 2014 by · Leave a Comment 

LeviathanNatural gas production from the offshore Leviathan gas reservoir should begin by 2018.

According to the Jerusalem Post,

“Delek Drilling, a member of the Leviathan partnership, made the announcement in the company’s third quarter financial report for 2014. The 621-billion cubic meter reservoir, located about 130 km. west of Haifa, will eventually be used for both domestic and export purposes.

In addition to Delek Drilling – which owns 22.67 percent of the basin – another Delek Group subsidiary, Avner Oil Exploration, also holds 22.67% of the reservoir, while Houston-based Noble Energy owns 39.66% and Ratio Oil Exploration has a 15% stake.”

Leviathan production is planned to involve two stages, the first going to domestic markets in Israel, the second going to export markets, with the first stage production at 18 billion cubic meters (635.7 billion cubic feet) per year.

As of a May 2013 the US Energy Information Administration reports that Israel’s domestic natural gas consumption is about 245 bcf, up a whopping 300% from its previous year. Israel’s coal consumption (used to power electrical generation plants) is planned to go down dramatically as more natural gas comes online.

The US EIA report also showed Israel’s electricity consumption going up over the last year and it’s petroleum consumption going down slightly.

This news brings up three interesting observations:

  1. Israel’s natural gas consumption is going up dramatically and expected to climb further as it replaced imported coal for electrical generation. As more natural gas comes online for domestic use, Israel will rely less and less on foreign energy sources. Israel is becoming, right now, more energy independent.
  2. Leviathan alone, in it’s first stage production, will produce more than two and a half times Israel’s current natural gas consumption. Leviathan isn’t the only potential source of Israel’s natural gas; Delek’s Tamar field produced 77.7 bcf of gas in just the third quarter this year – essentially 100% of Israel’s 2013 consumption. Israel is already natural gas independent and will soon be energy independent for electricity production.
  3. As Leviathan, Tamar and other natural gas sources continue to come online, Israel will become a major exporter of natural gas. Letters of intent to supply natural gas to Jordan and Egypt.

Something not mentioned in the recent Jerusalem Post article, Delek’s report or by the US EIA is the general assumption that oil reserves most likely lie under the gas fields. It’s a very real scenario that Israel will become not only energy independent in the near future but also a significant regional energy exporter.

How do you think this would change Israel’s current economic and political prospects?


Israel Reverses Flow of Egypt Pipeline

November 5, 2014 by · 4 Comments 

Israel gas pipelineThe Jerusalem Post reported recently that Noble Energy has signed a deal to supply gas to Egypt via the same pipeline that supplied Israel with Egyptian gas for years. Also in the JP article are mentions that Noble has agreed to sell gas to the Palestinians and to Jordan (my highlights in red below).

Turning the tables on the region’s natural resource flow, Israeli gas may soon surge southward through the Egyptian pipeline that for several years provided gas to Israel – but fell victim to saboteurs in Sinai.

The developers of the 282-billion cubic meter Tamar reservoir, which has been supplying gas to Israelis since March 2013, have signed a letter of intent to sell 2.5 b.cu.m. annually to the Egyptian firm Dolphinus Holdings Limited, the Delek Group reported to the Tel Aviv Stock Exchange on Sunday morning. This gas surplus sold to the Egyptian firm from Israel’s local supply will begin serving private industrial consumers already in 2015, according to the partners.

The move looks to revitalize Egypt’s East Mediterranean Gas Company pipeline that for several years carried gas from Egypt to Israel. In 2008, EMG began supplying Israel with about 40 percent of its natural gas provisions, until saboteurs began thwarting the flow through Sinai pipeline explosions. Following 14 months of such attacks, the Egyptian government formally terminated the agreement between EMG and Israel in April 2012.

At Tamar, located about 80 km. west of Haifa, Noble Energy holds 36% of the basin. Delek Drilling and Avner Oil Exploration each own 15.625%, while Isramco owns 28.75% and Dor Gas owns 4%.

The neighboring 621-b.cu.m. Leviathan gas reservoir, about 130 km. west of Haifa, is expected to begin flowing in 2017. Noble Energy owns 39.66% of Leviathan, while Delek Drilling and Avner Oil – both subsidiaries of the Delek Group – each own 22.67% and Ratio Oil Exploration holds 15%.

The realization of the project will help maximize the production capabilities from the Tamar reservoir, and will strengthen the Israeli economy by increasing tax and royalty revenues, said Delek Drilling CEO Yossi Abu.

Sunday’s announcement joins a number of other regional agreements and understandings that the Tamar and Leviathan partners have signed with Israel’s neighbors.

In September, the Leviathan reservoir partners signed a letter of intent to sell 45 b.cu.m. of natural gas to Jordan’s National Electric Power Company over a 15-year period.

Empty liquefaction plants in Egypt have become an attractive option for Israeli gas. The British Gas Group signed a letter of intent with the Leviathan partners for the 15-year supply of 105 b.cu.m. of natural gas to its Idku plant.

Meanwhile, in early May, the Tamar reservoir partners signed a letter of intent with Spanish firm Unión Fenosa, for the provision of 71 b.cu.m. to that firm’s liquefaction facility in Damietta.

In January, the Leviathan partners signed their first export deal – a $1.2b. sales agreement with the Palestine Power Generation Company.

According to the agreement, PPGC is set to buy around 4.75 b.cu.m. of gas over 20 years, to fuel a future 200-megawatt power plant in Jenin.

A month later, the Tamar reservoir partners signed a $500 million deal to provide 1.8 b.cu.m. of gas to the Jordanian firms Arab Potash and Jordan Bromine, to power their Dead Sea facilities for the next 15 years, beginning in 2016.

As far as Sunday’s letter of intent signed with Dolphinus is concerned, this latest deal is “another important link in a sequence of agreements that will enable the supply of natural gas to the domestic market in Egypt,” said chairman of Delek Drilling and CEO of Avner Oil Exploration Gideon Tadmor.

“I have no doubt that these are agreements that will strengthen the relations between Israel and its neighbors,” Tadmor said.

Israeli natural gas fields hold big promise for Noble Energy

February 14, 2014 by · 1 Comment 

An officer points as he stands on a tanker carrying liquefied natural gas in the Mediterranean, some 10 kilometers from Hadera(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.

Regionally, Jordan, Turkey and Egypt are hungry for natural gas supply and could be future buyers, 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.

Despite turmoil in nearby Egypt and Syria, as well as roller-coaster negotiations between Israel and the Palestinian Authority, Noble insists it’s not naive about operating in the region.

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.”

(Editing by Terry Wade and Bernadette Baum)

Noble Energy Discovers Gas Offshore Cyprus

January 10, 2012 by · 1 Comment 

HOUSTON, Noble Energy, Inc. (NYSE: NBL) recently announced a natural gas discovery at the Cyprus Block 12 prospect, offshore the Republic of Cyprus. The Cyprus A-1 well encountered approximately 310 feet of net natural gas pay in multiple high-quality Miocene sand intervals.

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.

Noble Energy delays Leviathan oil drilling

March 15, 2011 by · 3 Comments 

Noble Energy's Mediterranean Offshore Licenses

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.

Oil Discovered in Northern Israel

January 31, 2011 by · 32 Comments 

Givot Olam's Meged 5 Well

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?

Noble: ‘We say potential, Israelis hear discovery’

July 13, 2010 by · Leave a Comment 

Noble's Charles Davidson

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.”

Lebanon Speaker Urges Fast Action on Offshore Gas Reserves

June 9, 2010 by · 2 Comments 

Lebanon's Nabih Berri

(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.

Noble Energy to be honored for Israel gas discoveries

May 12, 2010 by · 1 Comment 

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.

USGS Says Israel Has 1.7 Billion Barrels of Oil

April 12, 2010 by · 28 Comments 

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.

Click here to download the USGS report.

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