Delek Group, along with other partners in the Leviathan gas field offshore Israel, on June 27, 2014, signed a non-binding Letter of Intent with BG International Ltd. (“BG”), in which the parties confirmed their intent to negotiate an agreement for the supply of natural gas from the Leviathan Project to BG, in order to supply BG’s existing facilities in the Idku city in Egypt.
The LOI includes several commercial conditions for the Binding Agreement. The estimated scope of the Binding Agreement is for the supply of 7 BCM (billion cubic meters) per annum for a period of 15 years. The supply of gas will take place from the FPSO and planned to be connected to the LNG facility through a subsea pipeline. According to the LOI the price of gas sold in the Binding Agreement will be determined in a formula as to be agreed by the parties.
It is clarified that the LOI is not binding (except for exclusivity for a certain period as agreed in the LOI) and the transaction stated above shall be subject to completion of negotiations between the parties and signing of the Binding Agreement.
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 Leviathan field has an estimated 19 Tcf of discovered natural gas resources.
Keith Elliott, Noble Energy’s Senior Vice President, Eastern Mediterranean, commented, “The LOI for the export of natural gas from Leviathan is a very positive development for the project and continues to evidence the strong demand for our discovered resources. Phase 1 of the Leviathan project is designed to provide significant quantities of natural gas to Israel and regional markets. This transaction, in combination with regional cooperation, will also provide access for Eastern Mediterranean gas into global markets. Negotiations with other potential customers for Leviathan natural gas are progressing, and I anticipate additional agreements to be executed this year in support of the development of the first phase of Leviathan.”
A final gas purchase and sales agreement is to be negotiated and will be subject to the receipt of regulatory approvals in Israel and Egypt.