Israel and Chevron Ink Pipeline Deal Raising Gas Exports to Egypt

State-owned Israel Natural Gas Lines Ltd (INGL) signed an agreement to allow the Chevron Corp-led Leviathan consortium to use the planned Nitzana pipeline to ship more natural gas from the Israeli offshore field to Egypt, Leviathan co-venturer NewMed Energy LP said Tuesday.

Israel’s government approved the Nitzana Project, which consists of the onshore pipeline and supporting infrastructure, about two years ago, as announced by the Energy and Infrastructure Ministry May 8, 2023.

Designed to raise Israel’s capacity to export gas to the North African country by six billion cubic meters (211.89 billion cubic feet), the pipeline will stretch about 65 kilometers (40.39 miles) from the Ramat Hovav area to the Egyptian border near Nitzana, according to the ministry’s announcement.

Israel’s Natural Gas Authority has allotted at least 33.33 percent or 140 million British thermal units (MMBtu) of the pipeline’s capacity to the Leviathan group, according to NewMed Energy, Leviathan’s biggest owner.

On September 1 the Leviathan partners told the Natural Gas Authority and INGL they are prepared to bear the full cost of the Nitzana pipeline’s construction in exchange for 100 percent of the pipeline’s capacity should the other exporters do not exercise their rights to receive an allocation, NewMed Energy said in a regulatory filing Tuesday announcing the Transmission Agreement between Leviathan operator Chevron and INGL.

Under the Transmission Agreement, the Leviathan group’s expected share of the Nitzana Project’s budget of approximately $610 million is $92 million, assuming a pipeline capacity allocation of 33.33 percent.

Additionally, “Chevron shall pay a transmission tariff comprising a capacity fee and a throughput fee for the gas quantity actually transmitted, in accordance with the standard transmission tariffs in Israel”, NewMed Energy said.

“INGL undertook to provide interruptible transmission services of additional quantities of gas over and above the Basic Capacity [140 MMBtu], subject to the capacity available in the transmission system, in a minimum scope no less than 1.8 Bcm per year (for all of the exporters that shall engage in the Transmission Agreement)”, NewMed Energy said.

The Transmission Agreement lasts 15 years, extendable up to five years, according to NewMed Energy.

Before the start of exports to Egypt, the Transmission Agreement allows Chevron to divert volumes up to the minimum allotment of 140 MMBtu to the Jordan North pipeline.

After the start of exports to Egypt, Chevron could still divert supply up to the minimum allotment to Jordan if shipping to Egypt “is not possible for whatever reason”, NewMed Energy said.

“The flow of gas under the Transmission Agreement shall commence no later than 36 months from the date of fulfillment of the conditions precedent”, NewMed Energy said.

“Concurrently with the signing of the Transmission Agreement, Chevron and the other Leviathan partners signed a services agreement, under which it was determined that the Leviathan partners shall be entitled to transmit natural gas (through Chevron) under the Transmission Agreement, and be responsible for the fulfillment of Chevron’s undertakings under the Transmission Agreement on a back-to-back basis, as if the Leviathan partners were a party to the Transmission Agreement instead of Chevron, each according to its proportionate share in the Leviathan Project”, NewMed Energy said.

Current Exports

Meanwhile the Leviathan consortium has requested an export permit for a recently amended agreement for the current export of Leviathan gas to Egypt. The new agreement with buyer Blue Ocean Energy is for an increase of 130 Bcm, NewMed Energy said August 7.

The added quantities are expected to generate about $35 billion in revenue, according to NewMed Energy.

Under the amendment, the total volume for Leviathan exports to Egypt will be increased in two increments, first by about 20 Bcm and later by about 110 Bcm.

“The amendment to the export agreement determines a mechanism for the timing of commencement of the supply of the increased daily quantity, which is primarily based on the sellers’ estimate regarding the progress of the projects required for expansion of the daily supply quantity, and chiefly completion of phase one of the [Leviathan] expansion project and completion of the project for the construction of the Nitzana pipeline”, NewMed Energy said then.

“To the sellers’ assessment, as of the report date, the said projects are expected to be completed in 2029”, NewMed Energy said.

Leviathan Expansion

Also last month NewMed Energy said the Leviathan consortium received consent from the Energy and Infrastructures Ministry for a new development plan to grow the production and export capacity of the gas and condensate field.

The revised plan for the expansion project, called Phase 1B, would grow Leviathan’s production capacity to about 23 billion cubic meters a year, NewMed Energy said August 21. Leviathan, discovered 2010 off the coast of Haifa city, went onstream December 2019 under Phase 1A, which has a capacity of about 12 Bcm per annum, according to NewMed Energy.

The consortium plans to implement the updated Phase 1B plan in either one go or two stages. Stage I would increase the production capacity to about 21 Bcm a year. Stage II would add about two Bcm.

The Leviathan consortium plans to make a FID (final investment decision) on stage I in the fourth quarter.

Stage I would drill three production wells, add new subsea systems and expand processing facilities on the existing platform. The total cost is estimated to be $2.4 billion gross. According to a NewMed Energy regulatory filing February 23, 2025, so far the partners approved $505 million.

Stage II “mainly includes the drilling of additional production wells and related subsea systems, and in this context, insofar as required, the laying of a fourth pipeline between the field and the platform, in a manner that is expected to increase the maximum daily production capacity by another ~2 Bcm per year, i.e. to a total quantity of ~23 Bcm per year”, said the February announcement.

Construction of the third pipeline, under Phase 1A, has been delayed by the conflict that followed Hamas’ assault on Israel October 2023. NewMed announced the suspension of construction October 7, 2024, saying the delay could stretch to six months. The third pipeline had been planned to be completed mid-2025.

Chevron operates Leviathan with a 39.66 percent stake through Chevron Mediterranean Ltd. NewMed, owned by Israel’s Delek Group, holds 45.34 percent. The other partner, Ratio Energies LP, also an Israeli company, owns 15 percent.

To contact the author, email jov.onsat@rigzone.com