Noble Energy confirms Leviathan field sanction

Noble Energy has confirmed it has sanctioned the first phase of the Leviathan gas field development offshore Israel.

The confirmation comes only hours after Noble’s Israeli partners in the field, Delek and Avner, said they had made the final investment decision for the project.

The U.S. company said the first gas from the field located in the Mediterranean Sea was targeted for the end of 2019. The giant gas deposit was discovered in 2010.

David L. Stover, Noble Energy’s Chairman, President and CEO, said Leviathan marked the company’s third major natural gas development offshore Israel. Noble has previously developed the Mari B and Tamar fields.

Stover said that bringing Leviathan in production would expand Israel’s supply of natural gas, further support the State’s commitment to convert coal-fired power generation facilities to cleaner burning gas, and provide affordable energy resources to Israeli citizens and neighboring countries in the undersupplied region.”

Leviathan will provide a second source of natural gas for Israel through a separate tie-in location in northern Israel.

Fixed platform

Leviathan’s initial development will include four subsea wells, each capable of flowing more than 300 million cubic feet per day (MMcf/d) of natural gas. Initial Leviathan proved reserve bookings associated with this investment are 3.3 Tcf net (9.4 Tcf gross) and are expected to be recorded in 2017.  This translates into approximately 550 million barrels of oil equivalent net, representing an increase of over 35 percent to total company reserves, Noble said. To remind, the field as a whole has been estimated to hold around 22 Tcf of gas.

Production will be gathered at the field and delivered via two 73-mile flowlines to a fixed platform, with full processing capabilities, located approximately 6 miles offshore.

The Leviathan platform will have an initial deck weight of 22,000 tons.  Processed gas will connect to the Israel Natural Gas Lines Ltd. onshore transportation grid in the northern part of the country and to regional markets via onshore export pipelines. The approved development plan allows for future expansion from its initial 1.2 billion cubic feet per day (Bcf/d) capacity to 2.1 Bcf/d.

Investment of $3.75 billion

The cost of the first phase of the Leviathan has been estimated at $3.75 billion, of which Noble will pay $1.5 billion, and its partners, Delek, Avner, and Ratio to contribute the remaining 2.25 billion.

Noble said it can fund phase one of Leviathan through Tamar operating cash flows as well as Eastern Mediterranean portfolio proceeds. Regional portfolio proceeds received to-date total approximately $575 million, net. Despite having the cash, Noble said it would also secure access to a financing facility for additional funding flexibility.

Major contracts awards upcoming

According to the Noble, which operates the Leviathan, front-end engineering and design are complete, the company is currently finalizing major project contracts, and long lead materials procurement has begun.

Noble Energy and partners anticipate drilling one to two Leviathan development wells in 2017.  Completion activity for all four producer wells, including two previously drilled, is anticipated in 2018. The Company expects to complete project installation and initiate commissioning in the fourth quarter of 2019, with delivery of first gas targeted for the end of 2019.

Marketing progress has resulted in total volumes under firm gas sales agreements to date of up to 525 MMcf/d.  Combined gross revenues for these contracts are estimated to be in excess of $15 billion over the life of the agreements. Total quantities of the executed gas sales agreements, together with domestic and regional volumes under negotiation, now exceed 1 Bcf/d gross.

Pricing protected

Leviathan blended sales price realizations for the domestic and regional markets are estimated between $5.50 and $6 per thousand cubic feet (Mcf) based on current Brent oil pricing. Pricing is protected in a low commodity price environment with firm floors and has upside potential linked to Brent oil price increases. Terms of the domestic pricing are responsive to the Natural Gas Regulatory Framework and reflect current market conditions.

Noble Energy’s targeted sales volumes are 1 Bcf/d gross at startup. Operating cash flow for the first year following startup is projected to be at least $650 million net and full project payout is expected within 3 years following startup at target volumes.

Noble Energy operates Leviathan with a 39.66 percent working interest.  Other interest owners are Delek Drilling with 22.67 percent, Avner Oil Exploration with 22.67 percent, and Ratio Oil Exploration (1992) Limited Partnership with the remaining 15 percent.

Offshore Energy Today Staff