Dolphinus committs to buy more offshore gas from Israel

Partners in Noble Energy operated Leviathan and Tamar gas fields offshore Israel have signed revised agreements for the supply of gas to Egypt’s Dolphinus Energy. The company has agreed to buy more than 85 BCM of gas from the Leviathan and Tamar partners.

Tamar platform / Image source: Delek
Tamar platform / Image source: Delek

Under the amended agreement, signed on September 26, Dolphinus will buy around 60 BCM of natural gas from the Leviathan field. This is a significant increase compared to 32 BCM stipulated under the original agreement.

The supply will start on January 1, 2020, and will continue until December 31, 2034, or until the supply of the full contractual quantity, whichever is earlier. The giant gas field is expected to start production later this year.

The Leviathan development reached a major milestone in September when Heerema’s SSCV Sleipnir, the world’s largest crane vessel, completed a 15,300 tonnes lift, installing the Leviathan gas platform topsides.

Back to the gas sales agreements, while the volume of gas to be sold from the Leviathan to Dolphinus has increased, the Tamar volumes have been reduced from the original agreements signed last year.

Under the revised deal, Dolphinus will buy 25,3BCM, down from 32,3 BCM envisioned by the original agreement.

Tamar partners will supply gas to Dolphinus starting June 30, 2020, until December 31, 2034.

Noble Energy holds a 39.66 percent working interest in the Leviathan project. Other interest owners include Delek Drilling LP with 45.34 percent and Ratio Oil Exploration LP with 15 percent interest.

As for Tamar, Noble Energy holds a 25 percent there, with partners being Isramco Negev 2 LP with 28.75 percent, Delek Drilling LP with 22 percent, Tamar Petroleum Ltd. with 16.75 percent, Dor Gas Exploration with 4 percent and Everest Infrastructures with 3.5 percent.

According to Israeli energy company Delek, the price of gas to be supplied will be set according to a formula based on the price of a Brent oil barrel which includes a “floor price”.

The agreements include a mechanism for an update of the price at a rate of up to 10% (addition or reduction) after the fifth year and after the tenth year of the agreements upon the fulfillment of certain conditions set forth in the agreements.

David L. Stover, Noble Energy’s Chairman, and CEO, stated: “This agreement is a major step for Noble Energy’s Eastern Mediterranean projects, expanding the long-term export demand in the region. The supply flexibility between assets will enable Tamar to continue producing at high rates, while Leviathan grows rapidly toward its initial capacity. With first gas from Leviathan anticipated by the end of the year, this agreement provides further clarity to our 2020 cash flow profile and beyond.”

The amended agreements are subject to certain regulatory approvals. In addition, the Company and its partners are working to complete the acquisition of an interest in the EMG Pipeline, which is anticipated to occur early in the fourth quarter of 2019.

Delek said that conditions precedent include receipt of an export approval from the Israeli Ministry of energy and of the country’s Tax Authority. These are expected to be granted by the start of the commercial gas flow from the Leviathan project. Furthermore, the transaction is subject to the closing of the EMG pipeline Transaction.

EMG Pipeline

To remind, Delek and Noble Energy last year agreed to buy a stake the East Mediterranean Gas company securing ownership in the EMG gas pipeline linking Israel and Egypt, which will serve as a transport route for gas from the Tamar and Leviathan offshore field.

EMG is a private company registered in Egypt which owns a 26 inch, c. 90 km subsea pipeline – the EMG Pipeline – connecting the Israeli transmission system in the Ashkelon area with the Egyptian transmission system in the El-Arish area, as well as related facilities.

The EMG Pipeline was designed for a capacity of approx. 7 BCM per year, with an option to increase the capacity to approximately 9 BCM per year by installing additional systems.

The flow of gas through the EMG Pipeline from Egypt to Israel was stopped several years ago, and according to Delek, EMG has no commercial activity.

According to a document shared by Delek last year, the transaction included a sale of a 39 percent stake in the pipeline to a joint venture company formed by Delek, Noble, and EGAS for a total amount of $518 million. Of the $518 million to be paid, Delek and Noble will each pay around $185 million with the balance being paid by the Egyptian Partner.

Offshore Energy Today Staff

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