In war mode: Israel wants to double gas exports and expand production

The Israeli government has approved plans to more than double the country’s natural gas exports and expand production at the giant Leviathan gas field in a bid to improve energy security and strengthen diplomatic ties. Energy Minister Eli Cohen has given the green light to export an additional 118 billion cubic meters of natural gas from eastern Mediterranean reserves, more than double the 105 billion cubic meters previously approved. NewMed Energy (OTCPK:DKDRF) announced that its partners Chevron Corp. (NYSE:CVX) and Ratio Oil Corp intend to invest $400 million to $500 million in engineering and long-term upfront costs for the expansion. Leviathan is one of the world’s largest deepwater gas fields, with an estimated 22.9 trillion cubic feet of recoverable gas. The 330 square kilometer field was discovered in December 2010 by NewMed Energy, Chevron Corp and Ratio Oil Corp. NewMed is the primary operator of Leviathan with a 45.3% interest; Chevron has a 39.7% interest, while Ratio owns a 15% interest.

According to NewMed, Israel plans to gradually increase the Leviathan’s production from the current 12 billion m³ to 21 billion m³ per year. The group is currently negotiating new contracts to sell gas domestically and abroad. Last year, Israel exported 8.6 billion m³ of gas to Egypt in 2023, a 39% increase from the previous year, and sent another 2.9 billion m³ to Jordan.

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Two years ago, Israel, the European Union and Egypt signed a memorandum of understanding (MoU) to promote natural gas exports to Europe. This framework was hailed as the first to allow Israel to export “significant” volumes of gas to Europe.

Israel becomes a regional gas superpower

The Middle East has traditionally been considered a global oil and gas superpower, thanks to the region’s staggering natural gas reserves of 75.8 trillion cubic meters – the largest in the world – and significantly more than the 56.6 trillion cubic meters located in the Commonwealth of Independent States (former Soviet republics). In recent years, however, Israel has emerged as a natural gas superpower in the Mediterranean, with the country’s natural gas reserves growing by an impressive 40% over the past decade, largely due to increased drilling and exploration activities. During that time, offshore production has increased fivefold since Israel’s first major producing Tamar field came online in 2013. Israel’s gas reserves have grown from 780 billion cubic meters (bcm) in 2012 to 1,087 bcm at the end of 2022, while 119 bcm were produced during the same period.

The Levant Basin in the eastern Mediterranean has become one of the world’s most important gas deposits. Over the past two decades, countries in the region, including Israel, have discovered 85 trillion cubic feet (~2.4 trillion cubic meters). The gas-rich offshore basin between Egypt, Israel, Cyprus and Lebanon has attracted some of the world’s largest energy companies as Europe scrambles to secure supplies to replace Russian gas.

NewMed Energy, Chevron and British-Dutch oil company Shell Plc (NYSE:SHEL) are also partners in the Aphrodite gas field. Discovered in 2011, the Aphrodite gas field is located approximately 170 kilometers south of Limassol, Cyprus, just 30 kilometers northwest of Israel’s Leviathan gas reservoir. An appraisal well has already been drilled to confirm estimates of the nature and size of the Aphrodite gas reservoir and represents a “significant step” toward its development. The well is expected to serve as a production well upon completion of reservoir development.

“In addition to advancing the second phase of the Leviathan reservoir, which meets the needs of the local and regional economy, we are making progress and significantly advancing the development of the Aphrodite reservoir. Global demand for natural gas is increasing and a large reservoir like Aphrodite could help meet demand.said Yossi Abu, CEO of NewMed Energy.

Not surprisingly, major oil companies are flocking to Israel to stake their claim on the country’s newly discovered gas reserves. Last year, NewMed shares rose more than 60% after BP Plc (NYSE:BP) and Abu Dhabi National Oil Company (ADNOC) announced that they have agreed to form a joint venture to acquire a 50 percent stake in the Israeli exploration company in a $2 billion deal. Unfortunately, in March 2024, the two companies announced that they had suspended the deal in light of the ongoing war between Israel and Hamas. Experts had previously warned that a rise in civilian casualties could make it politically untenable for the companies to continue, with the death toll in Gaza reportedly exceeding 30,000.

By Alex Kimani for Oilprice.com

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