The Leviathan field partners agreed to supply up to 45 Bcm of natural gas to Jordan
Houston-based Noble Energy (ticker: NE) announced last week that it has reached an agreement with the National Electric Power Company of Jordan (NEPCO) to supply natural gas from the Leviathan field. Leviathan is Israel’s largest gas field. The field is being jointly developed by Noble and Israel’s Delek Drilling L.P.
The Leviathan project partnership is made up of Noble Energy Mediterranean (39.66% interest), Delek Drilling (22.67%), Avner Oil Exploration (22.67%), and Ratio Oil Exploration (15%). Avner Oil Exploration is 47.5% held by Delek Energy and 8.45% held directly by Delek Group. Ratio Oil Exploration was founded by Israeli businessman Yegal Landau in 1992.
Noble Energy first announced its significant discovery at Leviathan in 2010.
The Leviathan partners will supply a gross quantity of approximately 1.6 Tcf of natural gas from the field, or 300 MMcf/d over a 15-year period, according to Noble’s press release. NEPCO has an option to purchase an incremental 50 MMcf/d for a total of up to 350 MMcf/d.
The agreement includes a take-or-pay commitment, with pricing linked to Brent oil and a floor price. Noble and its partners expect gross contract revenues of approximately $10 billion.
Delek’s press release also indicates there is a total contract quantity of gas to be supplied in the deal, meaning that if the partnerships supplies 45 Bcm of natural gas before the 15-year term of the contract passes, the contract will be complete.
The supply of gas under the agreement is expected to begin with the commencement of the supply from the Leviathan reservoir and the completion of the transportation system necessary for the delivery of gas to NEPCO in Israel and Jordan. Noble expects first gas delivery “in as little as three years following sanction.”
The Leviathan partners are in pursuit of other customers for the field’s natural gas. In May, they announced a $3 billion gas supply contract to fuel the combined cycle gas turbine IMB Beer Tuvia power plant, which when finished will be located approximately 60 kilometers from Jerusalem.
Under the terms of that agreement, the Leviathan operators will supply IMB Beer Tuvia with 13 BCM of natural gas over the course of 18 years following the start of commercial operations at the Leviathan field, or until IMB Beer Tuvia consumes all 13 BCM, whichever comes first. The agreement also includes a provision to increase the contract length by two years, if the parties decide to exercise that option.
Noble deal increases tensions in Jordan
The news of the Leviathan deal with Jordan sparked protests in the country’s capital, Amman. On September 30, more than 4,000 people held a demonstration after Friday prayers concluded, reports Stratfor. The incident came after a week of social unrest incited by an array of issues unrelated to the natural gas contract, including the assassination of a Christian writer and popular dissatisfaction with the Jordanian government’s performance. For the most part, however, the protests are now under control.
While Jordan and Israel have a peace treaty with one another, more than half of Jordan’s population is of Palestinian origin, making cooperation with Israel a point of contention with many Jordanians. There is a chance that protests could pick back up, said Stratfor, but many citizens also recognize the benefits of the deal, and further demonstrations are expected to die out.
Jordan imports 90% of its energy needs
Jordan, unlike its immediate neighbors, does not possess significant energy resources according to the EIA. As of January 2014, the Oil & Gas Journal estimated Jordan’s proved oil reserves at just 1 million barrels and its proved natural gas reserves at slightly more than 200 billion cubic feet (Bcf).
Jordan imports crude oil, petroleum products, and natural gas to meet domestic energy demand, to the tune of having to import more than 90% of Jordan’s energy demand. Energy imports account for more than 40% of the country’s budget, according to the EIA.
Noble Energy has become a significant international oil and gas player in the Eastern Mediterranean which it quantifies like this: 10 Tcf Tamar field already online, the 22 Tcf Leviathan field appraised and flow tested, and a discovery offshore Cyprus.
