Noble’s gas production already supplies about half of Israel’s electricity
Noble Energy (ticker: NBL) announced today that it has sanctioned the initial development of the Leviathan natural gas project in offshore Israel. This will be Noble’s third major natural gas development in the area.
The Leviathan field lies offshore northwest Israel, under the Mediterranean sea. Noble began operating in the area in 1998, discovering both the Leviathan and the nearby Tamar fields. These two gas fields are among the most significant resources in the area, with combined gas recoverable gas resource of 32 Tcf. The fields are very similar, geologically speaking, with both targeting the Tamar Sands formation.
Source: Noble Energy
Initial development of the Leviathan field will include four wells, each capable of flowing more than 300 MMcf/d. Noble expects that this production rate can be sustained for an extended period, with a 25 year lifetime expected for each well. This development is expected to significantly grow Noble’s proved reserves by adding 3.3 Tcf net. Equating to 550 MMBOE, this would increase the company’s total reserves by 35%.
Development will realize prices of $5.50 to $6.00 per Mcf
This first phase of development is expected to cost $3.75 billion, of which Noble will contribute $1.5 billion. One or two of the planned four wells will be drilled in 2017, with the rest drilled and completed in 2018. First gas is expected by the end of 2019. This schedule seems accurate, as the time from sanction to first gas in the nearby Tamar field was 2.5 years.
This development will be able to take advantage of regional gas prices that are significantly higher than seen in the U.S. Noble estimates that it will realize prices between $5.50 and $6.00 per Mcf. According to Noble, these margins make the Leviathan economically competitive with the best U.S. unconventional oil basins. Current planning indicates that all gas produced will be sent by pipeline to an offshore platform for processing, and then sent to Israel. Israel’s transition away from coal has been fueled in large part by Noble’s gas, with production from the Tamar currently providing about half of Israeli electricity.
