Leviathan Partners Sell Gas to Palestine Power Generation Company

Delek Drilling Limited Partnership and Avner Oil Exploration – Limited Partnership (together “the Partnerships”) have announced the signing of a natural gas supply agreement between the Partnerships and the other partners in licenses 349/Rachel and 350/Amit, with the Palestine Power Generation Company PLC ( “PPGC”).

According to the agreement, the PPPGC will acquire natural gas from the Sellers for power plant operating needs that the Purchaser intends to build near Jenin in the northern West Bank.
“Further to that stated in the Partnerships shelf prospectus dated May 31, 2013, as amended on August 5, 2013, hereby a notice is issued that on January 5, 2014 a natural gas supply agreement was signed between the Partnerships and the other partners in licenses 349/Rachel and 350/Amit with the PPGC. According to the agreement, the Purchaser will acquire natural gas from the Sellers for power plant operational needs that the Purchaser intends to build near Jenin in the northern West Bank (the “Supply Agreement”).

Under the Supply Agreement, the Sellers committed to supply natural gas to PPGC in the total scope of 4.75 BCM (the “overall contractual amount”).

The period of the Supply Agreement will start from the beginning of the flow of gas from the Leviathan Project and shall end after 20 years, or at the date that PPGC shall have purchased the overall contractual amount, whichever is the earlier (“Supply Period”). The PPGC is entitled to reduce the quantities to be purchased in accordance with a mechanism defined in the Supply Agreement.
PPGC undertook to take or pay a minimum annual quantity of gas to the extent and in accordance with the mechanism set forth in the Agreement.

The price of gas determined in Supply Agreement will be linked to Brent Crude prices, and includes “a floor price”.
The Sellers estimate that the aggregate level of revenues from the sale of natural gas to PPGC (at a ratio of 100% of the rights in the Leviathan Project) during the Supply Period (and based on an evaluation by the Leviathan partners regarding the price and quantity of natural gas which will be purchased during the Supply Period), is likely to aggregate to approximately US$ 1.2 billion.
If the overall contractual amount is reduced as mentioned above, the revenue scope is likely to aggregate to approximately US$ 1 billion. It should be clarified that the actual revenues that will be derived depends on various factors, including the quantities of gas actually purchased by PPGC and the Brent Crude prices at the time of sale.
The Supply Agreement includes several contingent conditions, of which the main ones are the development approval of Leviathan Project by the Sellers, obtaining all regulatory and other approvals required by law for the development of the project and gas exported from it, the financing development closure of the Sellers’ project and the financial closure of the Purchaser in financing the construction of the power plant.
In the Partnerships’ best knowledge, PPGC is a special purpose company dedicated to be developed, construction and operation of power plants in the area of the Palestine Authority, which is registered and operating under the laws of the Palestine Authority.

The partners in the Leviathan project and their holdings:
Noble Energy Mediterranean Ltd. 39.66%
Delek Drilling – Limited Partnership 22.67%
Avner Oil Exploration – Limited Partnership 22.67%
Ratio Oil Exploration (1992) – Limited Partnership 15.0%

Press Release, January 06, 2014

 

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