Israel Gets First Gas from Leviathan; Exports to Follow

JERUSALEM (Reuters) - Israel's $3.6 billion offshore Leviathan field started production on Tuesday, paving the way for multi-billion dollar gas export deals with Egypt and Jordan in the coming weeks.

(photo: Delek Drilling)

Natural gas began flowing from Israel's largest field despite regulatory delays and court petitions by groups opposing the project raised doubts that its operators would meet their end-of-2019 timeline.

However, Texas-based Noble Energy, Israel's Delek Drilling and Ratio Oil said that operations had started, effectively doubling the amount of Israeli-produced gas and lifting shares in both Israeli firms.

"Israel is now an energy powerhouse, able to supply all its energy needs and gaining energy independence," said Delek Drilling Chief Executive Yossi Abu.

The supply of gas from Leviathan wells, 80 miles (130 km) west of the port city of Haifa, allows Israel to shift away from more polluting fuels, primarily coal, for electricity generation.

The gas will be transported from the platform via a subsea pipeline connected to Israel's transmission system and from there to consumers throughout the country.

"We think it's a huge day for Israel and the region," Noble Energy President Brent Smolik said during a visit to Israel.

And exports are expected to begin shortly.

"Exports to Jordan will start ... within the next 48 hours. We are finalizing the full ramp-up to the platform," Keith Elliott, Noble Energy's senior vice president, said.

Strong Potential

The Leviathan group signed a $10 billion deal to supply gas to Jordan's National Electric Power Co in 2016. Egypt will begin importing Israeli gas by mid-January, Smolik told Reuters.

The amount of gas extracted from Leviathan is expected to reach 60 billion cubic metres over 15 years, while the nearby Tamar field will export 25.3 bcm in the same period. The value of the exports is estimated at $19.5 billion.

Ratio CEO Yigal Landau said the companies believe there is strong potential for the discovery of additional major reservoirs in Israel's exclusive economic zone.

Shares in Delek Drilling were up 8% in Tel Aviv, while Ratio's gained 7.6%.

Leviathan production was delayed earlier this month until a court lifted a temporary injunction granted over environmental concerns.

Another brief delay followed as Israel's Environmental Protection Ministry, which monitors emissions from the project, said it needed extra data from the firms running the field.

Smolik said the Leviathan platform was designed with "some of the most stringent guidelines in the world".

And given the proximity of the platform to Lebanon, security was at the forefront of the Israeli government's mandate when it approved the location, Elliott said. ($1 = 3.4563 shekels)