Insights from BCC Research

Approval Greenlights Development of Highly Anticipated Leviathan Gas Field

Posted by Clayton Luz on Jun 27, 2016 8:48:23 AM

Houston-based Noble Energy has received the green light from the Israeli government to proceed with development of its Leviathan gas field project in the Mediterranean Sea.

 
The project involves a subsea system that connects production wells to a fixed platform located offshore with tie-in onshore in the northern part of Israel. The fixed platform's initial capacity is anticipated to start at 1.2 billion cubic feet of natural gas per day (Bcf/d) and is expandable to 2.1 Bcf/d. 
 
Leviathan, which is expected to provide a second source of supply and entry point into Israel's domestic natural gas transport system, will also deliver exports to regional countries.
 
The offshore field is expected to become operational in 2019.
 
"Receiving support from the Government of Israel for the (plan of development) further builds upon recent regulatory momentum, including the Israeli Government's approval of the revised stability language in the Natural Gas Regulatory Framework as well as the National Planning Committee's approval of the offshore location for the Leviathan platform and pipeline connection onshore,” says J. Keith Elliott, Noble Energy senior VP.
 
Nobel Energy also announced the execution of a gas sales and purchase agreement to supply natural gas from the Leviathan field to IPM Beer Tuvia Ltd.  Under terms of the agreement, the company and the Leviathan partners will supply a gross quantity of up to 473 billion cubic feet of natural gas to a new-build independent power facility over an 18-year term, or up to 72 million cubic feet per day (MMcf/d).  The company expects natural gas sales to IPM to begin at field startup.
 
GLOBAL INDUSTRIAL GAS MARKET ACCORDING TO BCC RESEARCH
 
The global industrial gas market is predicted to grow from $66.7 billion in 2014 to $68.7 billion in 2015 and to $80.9 billion in 2020, according to Andrew McWilliams, a BCC Research analyst. The numbers reflect a compound annual growth rate (CAGR) of 3.3% from 2015 to 2020.
 
McWilliams projects the chemical and refining industries and the metallurgical industries to remain the largest consumers of industrial gases during the forecast period,
 
IMPORTANCE OF INDUSTRIAL GASES
 
McWilliams says that industrial gases play crucial roles in many sectors of the global economy, including agriculture, mining, oil and gas, construction, manufacturing (e.g., stone, clay and glass, primary metals, fabrication metals, industrial machinery, electrical machinery, motor vehicles, aerospace and transportation equipment, instruments, food and tobacco, paper and paper products, chemicals and chemical products, petroleum products, rubber and plastics), transportation, utilities, government, services and health.
 
He says one of the major strengths of the industrial gas industry is that it is not tied to one or two major markets for its success. These sectors, all of which rely on industrial gases in varying degrees to produce their final products or services, account for more than 50% of the total global GDP.
 
PRINCIPAL INDUSTRIAL GAS TYPES AND THEIR APPLICATIONS
 
Industrial gases include atmospheric gases and process gases. Atmospheric and rare gases are produced when air is purified, compressed, cooled, distilled and condensed through a sophisticated air-separation process to produce nitrogen, oxygen, argon, xenon, krypton and neon. Process gases (e.g., hydrogen, helium, carbon dioxide, carbon monoxide, syngas, acetylene, propane, and specialty gases) are recovered from natural gas or from chemical feedstocks.
 
LEVIATHAN FIELD DISCOVERED 2010, AGREEMENT REACHED 2016
 
The Leviathan field, discovered in 2010, is estimated to contain over 22 trillion cubic feet of gas. According to Reuters, the site is expected to cost more than $5bn to develop.
 
The news agency quoted Noble Energy business development manager Niv Sarne as saying: "This deal is an important milestone, in that it establishes another domestic contract that, together with additional domestic and export contracts, are essential for the quick development of Leviathan."
 
Regulatory hurdles and political disagreements in Israel held up approval for years. A chief concern was whether Noble would have too big a hold on the country’s natural gas market. However, the agreement was signed on the basis of the revised natural-gas plan approved by the government, the gas companies said.
 
Yossi Abu, chief executive of Delek subsidiaries Delek Drilling and Avner Oil, says the government approval gives “tremendous tailwind to our continued activity to promote the development of Leviathan, in order for Israeli gas to flow from the reservoir by the end of 2019.”
 
Sarne says, “We are pleased to sign the second Leviathan contract and the first to be signed after the government passed the new stability clause. This deal is an important milestone, in that it establishes another domestic contract that, together with additional domestic and export contracts, are essential for the quick development of Leviathan.”
 
He also says the natural-gas discoveries enabled IPM’s entrance into the market. The supply of natural gas would allow IPM and other domestic customers to base their production facilities on a clean and inexpensive source of energy, and would enhance redundancy and energy security, according to Sarne.
 
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.  
 
The IPM power station, which is controlled by Triple M and Israel Power Management 3000, is slated for construction on a 15.5-acre site. It will produce 430 megawatts of electricity using combined cycle power technology (natural gas as the main fuel and diesel oil as a back-up).

Topics: Chemicals