LNG

US oil giant Chevron has taken a final investment decision (FID) to expand gas production at the Leviathan field in Israel in a bid to boost gas supplies to neighbouring Egypt, which exports LNG to European buyers.

Egyptian Natural Gas Holding Company (EGAS) strives to source more LNG to meet the country’s growing gas deficit via a second floating regas terminal. The ‘Energos Winter’ FSRU, chartered from New Fortress Energy, is currently en route to Damietta Port, where it will join the Energos Eskimo before the end of August.

If tensions between Iran and Israel escalate into a regional war scenario, it could severely impact regional oil and gas exports as well as global shipping routes. Attacks on key facilities could wipe out nearly 1.4 million bpd of Iranian production and a full-blown war would choke the Strait of Hormuz, risking up to 12 million bpd of oil, analysts warn.

Upstream activity in Iran, so far, has stayed steadfast despite fighting following Hamas’ assault on Israel in October 2023. Iran's production rose by 227,000 bpd to 3.27 million bpd in August year-on-year, while Israel’s gas output grew 15% in 2023 and is expected to rise by 5% this year, supported by the Karish field.

Some $2 billion in greenfield investment had been planned for various upstream projects in the coming years. But production at the Karish and Katlan fields could be severely reduced if regional tensions escalate, hence future production and exports are at risk.

Anticipating the future is challenging, Rystad’s Middle East research director, Aditya Saraswat noted. So far – with no direct attacks between Iran and Israel, the conflict is largely a ‘proxy war’. As of today, there have not occurred major assaults on critical oil and gas infrastructure such as pipelines, storage facilities, or refineries.

All eyes on maritime borders

If things get worse, the maritime border agreement between Israel and Lebanon, signed in October 2022, could be torn to pieces. The agreement defines each country's rights over the Karish and Qana fields, with Israel retaining full rights to Karish and Lebanon to Qana.

“Escalating tensions could lead to the nullification of this agreement, affecting Israel's production from the Karish field, which is currently used for domestic supply,” Saraswat reckons, suggesting: “This disruption may also impact Israel's gas exports to Egypt and Jordan, which saw significant growth in 2023.

“Any decline in production and exports from Karish could be offset by increased output from other major fields like Tamar and Leviathan,” he noted.

The fields hold about 88 billion cubic meters (Bcm) of cumulative proven and probable (2P) reserves. Together, they form the independent’s core area of operation – following the divestment of its Croatian, Italian, and Egyptian assets. Production from the Katlan fields (Athena and Zeus) is expected to start by 2027.

All these fields are located near the Karish field near Lebanon’s maritime border, so analyst warn that any significant unrest could delay start-up.

NewMed Energy, the Israeli company with stakes in the East Mediterranean gas fields like Leviathan offshore Israel and the Aphrodite field offshore Cyprus and with LNG export ambitions, reported solid earnings and steady exports to regional markets amid advances in several projects.

Delek Group, the Israeli company developing the Leviathan gas field offshore Israel with Noble Energy of the US, confirmed the start of first gas deliveries in December and ongoing plans for a floating LNG project.

Noble Energy and the Israeli Delek Group, owners of the huge Leviathan natural gas field in the East Mediterranean, have signed agreements with Golar LNG and Belgian shipping company Exmar to carry out engineering studies for a possible floating LNG production and export venture offshore Israel.

Noble Energy, the US exploration and production company, has reported that its liquefied natural gas feed-gas plans for offshore Israel and Equatorial Guinea were on track.

Delek Group of Israel is discussing liquefied natural gas marketing possibilities for the giant Leviathan field in the Eastern Mediterranean currently under development and set to come on stream in 2020.

Delek Drilling is the largest shareholder in the Leviathan field and is looking into several options for some of the 22 trillion cubic feet of natural gas in the field that has not already been sold to pipeline customers in Israel and Jordan.

These include Delek sending volumes by an existing pipeline to Egypt for domestic use or as feed-gas for one of Egypt’s LNG export plants at Damietta or Idku, or setting up its own floating LNG infrastructure.

The Israeli company owns more than 45 percent of the Leviathan field while US company Noble Energy is the operator with just short of 40 percent. The balance is held by  stock exchange shareholders.

Firm pipeline supply agreements have already been signed for the Leviathan project with buyers such as Jordan’s National Electric Power Company, set to take 45 billion cubic metres in a deal lasting at least 15 years.

Another Leviathan supply deal has been signed by Israeli company Edeltech, which is buying the gas for power plants it owns with Turkish partner Zorlu Energy in Ashdod and Mishor Rotem.

Delek and Noble have also signed letters of intent to supply Leviathan natural gas to customers in Egypt such as Dolphinus Holdings and the operator of the Idku LNG export plant, now Royal Dutch Shell.

The Israeli media has also reported that ExxonMobil was interested in setting up a floating LNG option for the Leviathan project partners to join. The reports explained that while talks with ExxonMobil had taken place, it was too early to say if any agreement was likely.

ExxonMobil and Middle East LNG partner Qatar Petroleum have also recently made a large natural gas discovery in the East Med offshore Cyprus.

The ExxonMobil-QP discovery is at the Glaucus-1 well located in their exploration Block 10 in Cypriot waters.

Based on preliminary estimates the ExxonMobil resources are between 5 Tcf and 8 Tcf, enough feed-gas for a small-scale FLNG project.

Another possibility for the Israelis and Noble is transporting some Leviathan gas volumes to the Egyptian Idku LNG export plant.

Idku is east of the city of Alexandria and first came on stream in 2005 and has capacity to ship up to 7.2 million tonnes per annum from two liquefaction Trains. It also has two storage tanks with a combined capacity of 280,000 cubic metres.

Idku is now operated by Shell and has been on stream again since 2017 as new Egyptian discoveries turned a natural gas deficit into a surplus. Shell acquired its Idku stake when it completed the takeover of BG Group in 2016.

Egypt’s second LNG export plant at Damietta is still idle, but the resolution of a legal dispute between the owners and the Egyptian government has now been resolved.

The facility has capacity of 5.5 MTPA of output and has two storage tanks each of 150,000 cubic metres capacity.

Damietta is owned by Union Fenosa Gas, a joint venture between Spain’s Gas Natural, now known as Naturgy, and Italian energy company Eni. They hold 80 percent of the shares and the remaining 20 percent belongs to the Egyptian government.

Royal Dutch Shell has formally exited a natural gas project offshore the Gaza Strip and handed over control to the Palestine Investment Fund (PIF), the Palestinian Authority’s investment arm, to seek its own energy success in an East Mediterranean field with proven reserves.

Noble Energy, the US-based company with interests in key North American basins and in the East Mediterranean, has closed its deal to sell a 7.5 percent working interest in the Tamar field, offshore Israel, to Israeli-listed Tamar Petroleum.