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Gas production starts from Israel's giant Leviathan field: Delek

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Gas production starts from Israel's giant Leviathan field: Delek

London — Gas production from the giant $3.6 billion Leviathan field project offshore Israel started Tuesday, project partner Delek Drilling said, with output expected now to ramp up "gradually."

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Delek and its partners -- operator Noble Energy and Israel's Ratio Oil -- had hoped to begin production last week from Leviathan, which holds 22 Tcf (620 Bcm) of recoverable gas reserves.

However, the start-up was delayed by a last-minute legal claim regarding emissions from the project.

"Today, December 31, 2019, piping of natural gas from the Leviathan reservoir commenced," Delek said in a short note.

Leviathan was discovered in 2010 but development was slow due to difficulty in monetizing the resource.

It was finally agreed in February 2018 for Leviathan gas to be exported to Egypt under a long-term contract with local supplier Dolphinus Holdings.

Leviathan is the second major gas field to start up this decade following the Noble-operated Tamar field in 2013, which up to now had served the Israeli domestic market.

Some gas from Tamar will also be piped to Egypt under the deal with Dolphinus.

'HISTORIC MILESTONE'

Israeli energy minister Yuval Steinitz said earlier this month the start-up of Leviathan and exports to Egypt were landmark events for the Israeli gas sector.

"The export of gas to Egypt from the Leviathan and Tamar reservoirs is the most significant economic cooperation between Israel and Egypt since the peace treaty was signed between the two countries [in 1979]," Steinitz said.

"This is an historic milestone for Israel. The natural gas revolution makes us an energy superpower, providing huge revenue for the state," he said.

Noble and its partners first signed a supply deal with Dolphinus in February 2018 for the supply of a total of 64 Bcm of gas from the two fields to Egypt over a 10-year period.

The gas to be delivered to Dolphinus is expected to be used mostly for supplying large industrial and commercial customers.

The contracts in October were extended to 15 years and total volumes contracted raised to 85 Bcm, with Leviathan gas making up more of the share of the supply mix between the two fields.

EMG PIPELINE

Gas will be piped via the currently idled EMG pipeline to Egypt, which has been engineered to allow reverse flows in the Israel-Egypt direction.

The line started operations in 2008 to flow Egyptian gas to Israel and ran until 2012 when operations were halted as Cairo's gas production began to decline after the Arab Spring the previous year.

The EMG pipeline has a design capacity of 7 Bcm/year -- or 19 million cu m/d.

Egypt was a fairly stable exporter of both LNG and pipeline gas until the Arab Spring, after which its domestic gas production slipped due to a lack of new investment.

It began importing LNG in April 2015 to fill the growing supply/demand gap, though with the rapid production increase at Eni's Zohr field, the country has become an exporter again and at the end of 2018 halted LNG imports.

Egypt is now positioning itself as a future hub for LNG exports, and surplus Israeli gas production could be supplied to the country's two LNG plants at Idku and Damietta for export to global markets.

--Stuart Elliott, stuart.elliott@spglobal.com

--Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com