LNG

NewMed Energy, a stakeholder in the largest Israeli offshore natural gas field and a likely future LNG feed-gas supplier, said it was looking more unlikely that it would proceed with the process of being listed on the London Stock Exchange through a reverse takeover of UK company Capricorn Energy.

The expected completion date of the NewMed merger with London-listed Capricorn was the first quarter of 2023.

However, Capricorn has been caught up in a dispute with a major shareholder and has put back a meeting of all shareholders to approve the deal with NewMed.

Capricorn had previously cancelled its proposed merger with UK rival Tullow Oil in favour of the combination with Israel’s NewMed, which was first announced on September 29, 2022.

There had been plans for a $1.4 billion merger between Tullow and Capricorn, which is based in Edinburgh and was formerly known as Cairn Energy.

Among its assets, NewMed holds the rights to 45 percent of the Leviathan Israeli offshore gas field with the other major shareholder in the field being Chevron Corp.

Cyprus gas field

NewMed also has the Aphrodite gas field in Cyprus's offshore economic zone waters, making it one of the biggest players in the East Mediterranean.

In the latest merger developments, Capricorn released a statement to the London Stock Exchange whereby it had decided to adjourn Capricorn's shareholder meeting called for the purpose of approving the NewMed transaction, to February 22 instead of February 1.

An alternative shareholder meeting was called at the request of one significant Capricorn shareholder, Palliser Capital (UK) Ltd., for the replacement of the serving directors of Capricorn with new directors that were proposed by Palliser and a meeting for this purpose was then scheduled to take place on February 1 instead of a meeting to approve the NewMed deal.

Members of the board of Capricorn, including the Chairman of the board and the Chief Executive, resigned immediately from the board and it was also the intention of two other directors, including the Chief Finance Officer, to resign from the board before the February 1 meeting called at the request of Palliser.

NewMed said that in view of these developments and the resignation of most of the Capricorn board members, the probability for the closing of the UK transaction had “significantly decreased”.

The Israeli company said it was continuing to examine strategic alternatives with the aim of “maximizing value” for its own shareholders.

NewMed is currently in the midst of plans to promote the expansion of the Leviathan gas field offshore Israel and the development of the Aphrodite reservoir alongside the launch of exploration and production of natural gas in other Middle East countries.

The Leviathan gas field in addition to supplying the Israeli domestic market also supplies Egypt and Jordan with gas and has existing plans to possibly supply feed gas for liquefaction at the two Egyptian LNG plants, Idku and Damietta, located east of Alexandria.

Chevron Corp., the US oil and gas major with additional successful LNG plants in Australia and in Africa and a pipeline gas supply business in the Middle East, has overhauled its corporate structure and senior executive team to strengthen portfolio operations.

Chevron, based in San Ramon in California, said that from October 2022 the company would consolidate its Upstream, Midstream and Downstream business segments under a new executive vice president for Oil, Products & Gas, who will oversee the full value chain.

As part of this change, the company is consolidating into two Upstream regions, Americas Exploration & Production and International Exploration & Production.

The company is also organizing its Strategy & Sustainability, Corporate Affairs and Business Development functions under a new executive vice president for Strategy, Policy & Development.

“The changes build on the company’s enterprise-wide transformation in 2020, which has produced improved operational and financial results,” said Chevron.

Chevron believes the new leadership structure will enable a more integrated approach to capital allocation, asset class excellence and value-chain optimization, and “facilitate more effective external engagement and business development” impacts.

Progress

“We’ve made significant progress over the last two years, and these changes position us to further enhance execution across all aspects of our business as the energy system evolves,” said Mike Wirth, Chevron’s Chairman and Chief Executive.

“It will also bring strategy, policy and business development into tighter alignment as we focus on leveraging our strengths to deliver lower carbon energy to a growing world,” stated Wirth.

The company made the following personnel appointments, effective October 1, 2022:

Mark Nelson was named executive vice president, Strategy, Policy & Development and Nigel Hearne is the new executive vice president, Oil, Products & Gas. Nelson and Hearne will report to Wirth in their new roles.

Clay Neff is the new president, International Exploration & Production; Bruce Niemeyer was named president, Americas Exploration & Production; and Balaji Krishnamurthy is taking the vice president role for Chevron Strategy & Sustainability.

LNG operations

Chevron’s major LNG activities are as the operator of three plants, Gorgon LNG and Wheatstone LNG in Western Australia and Angola LNG in southwest Africa.

Additionally, Chevron took over natural gas fields and assets offshore Israel when it acquired Noble Energy.

The company made additional personnel announcements regarding other senior executives.

Jay Johnson, executive vice president, Upstream, was named executive vice president, senior advisor, effective October 1, 2022, and will support the transition until January 31, 2023.

Johnson has more than 41 years of service to the company.

Retirees

Jay Pryor, vice president, Chevron Business Development, will retire after more than 43 years of service to the company, effective July 29, 2022.

Steve Green, president, Chevron North America Exploration & Production, will also retire after more than 24 years of service to the company and its predecessors, effective September 30, 2022.

“I’m confident that our new team will continue to effectively lead the company in delivering the affordable, reliable and ever-cleaner energy that enables human progress,” said Wirth.

Wirth stated that he especially thanked Jay Johnson, Jay Pryor and Steve Green for all they’ve done for Chevron, the industry and the company's employees over the course of their careers.

“Each of them exemplifies the finest qualities of character, integrity and excellence, and their influence will be felt for many decades still to come,” stated Wirth. 

The Kingdom of Jordan may be on track to become the third Middle East nation after Egypt and Israel to leave the liquefied natural gas market as more regional pipeline gas becomes available.

The only outcome that could stop Jordan no longer being an LNG importer at its facility at Aqaba is the withdrawal of Israeli pipeline gas supplies, which analysts believe is unlikely.

Jordan is an important market for Israel’s surplus gas and in fact an anchor for development of the first phase of the Leviathan gas project offshore Israel, according to an analysis from the consultancy, FACTS Global Energy.

“A short distance pipeline also provides Israel the highest netback for pipeline gas exports compared to other markets such as Egypt, and even Turkey,” said the report.

“The transportation cost for the Israel-Jordan section is estimated to be only US$0.12 per million British thermal units and the current netbacks are around US$5.90-US$6.40 per MMBtu,” added the report.

Jordan National Electric Power Corp. (NEPCO) is currently buying LNG from Shell based on a mid-term contract that expires in 2020.

However, the pipeline contract price agreed with Israel is lower than the LNG price per tonne for the country.

“NEPCO’s contract with Israel’s Leviathan consortium is linked to Brent prices and currently translates to a gas price of around US$6.00-6.50 per MMBtu (at US$70 per barrel Brent price), around US$2.20-2.70 per MMBtu lower than the MT LNG contract prices,” stated the FACTS report.

For Jordan, it makes economic sense to buy pipeline gas that is priced lower than LNG.

Jordan has already committed to import up to 350 million standard cubic feet per day of pipeline gas from Israel from December 2019, when the Leviathan gas project begins operating.

“The construction of a new 65-kilometres pipeline between Jordan and Israel is ahead of schedule and will be completed by the third quarter of 2019,” noted the report.

The Leviathan gas development project is also more than 80 percent completed and is set to start operation by the end of 2019. Jordan is already receiving small volumes of 10-12 mmscf/d of gas from Israel’s offshore Tamar gas field, owned by Noble Energy of the US and its main partners, subsidiaries of the Delek Group of Israel.

Jordan has also resumed gas imports by pipeline from Egypt on the back of new gas supply from the Egyptian Zohr gas field in the East Mediterranean.

The original contract was to import 250 mmscf/d of gas at a price of around US$2.50 per MMBtu.

However, following a gas supply shortage in Egypt, the pipeline flow to Jordan dropped substantially and was finally halted in late 2015.

During 2016 and 2017, NEPCO reversed the pipeline flow, and purchased 10 additional LNG cargoes per year to send to Egypt via the existing pipeline.

In August 2018, Jordanian and Egyptian Energy Ministers agreed to resume gas supply to Jordan and Egypt started sending interruptible volumes of gas to Jordan from September 2018.

“The current price of the Egyptian gas is estimated to be around US$5.00 per MMBtu, which is lower than Israel’s gas prices but the volumes are still negligible,” said the report.

Jordan’s pipeline gas imports from Egypt have been increasing in 2019 and are expected to reach 100 mmscf/d by the end of this year. Post-2020, gas imports from Egypt may reach 200 mmscf/d.

However, given the current supply/demand balance outlook for Egypt, it is difficult to see more gas supply to Jordan.

“Based on our estimates, Egypt will not have more than 200 mmscf/d of gas left for pipeline exports post 2020,” said the FACTS report.

“Interestingly, Egypt will also start importing Israeli pipeline gas from December 2019. Egypt has two contracts to import up to 640 mmscf/d of gas from Israel,” it added.

If everything goes as planned for pipeline deliveries, Jordan will reduce its LNG imports in the next couple of years and they can finally cease.

Jordan would still have flexibility to import occasional LNG cargoes post-2022 as the Golar floating storage and regasification unit contract with NEPCO is expiring in around 2025 and the Jordanians can keep the vessel until then.

“Jordan could decide to keep the FSRU for a longer period and import LNG or simply approach Israel for additional pipeline imports,” said the report.