Leviathan Gets over 40 Pct of Capacity of Planned Israel-Egypt Gas Line

Israel’s Natural Gas Authority allocated 41.8 percent of the capacity of the planned Nitzana natural gas pipeline to Egypt to the Chevron Corp-led Leviathan consortium, Leviathan co-venturer NewMed Energy LP said Sunday.

NewMed Energy, one of Chevron’s two local partners for the gas and condensate field offshore Israel, said in a bourse filing that to the best of its knowledge, the remaining capacity will be allotted to the Tamar gas field, also operated by Chevron, at 41.8 percent and London-based Energean PLC at 16.4 percent.

“Chevron, on behalf of the Leviathan partners, signed an amendment to the Transmission Agreement intended to reflect the updated allocated rate”, said the announcement on the Tel Aviv Stock Exchange.

Last month NewMed Energy signed the Transmission Agreement with state-owned Israel Natural Gas Lines Ltd (INGL), allowing the Leviathan partners to use at least 33.33 percent of the Nitzana pipeline’s capacity to ship more gas to Egypt. The minimum allotment could be increased if other exporters do not exercise their rights, NewMed said then.

NewMed Energy said Sunday, “Furthermore, to the best of the Partnership’s [NewMed’s] knowledge, concurrently therewith, the said other two exporters also signed transmission agreements with INGL in respect of the share allocated to them in the project, thereby satisfying the conditions precedent that had been stipulated for the Transmission Agreement’s entry into force and effect”.

The Leviathan partners will have a firm transmission capacity of nearly 176 billion British thermal units, NewMed Energy said Sunday.

“In addition, in accordance with the updated allocated rate, the Partnership’s share in the estimated project construction budget amounts to approx. $116 million”, it added.

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.

Announcing the initial Transmission Agreement on September 16, NewMed Energy said, “INGL undertook to provide interruptible transmission services of additional quantities of gas over and above the basic capacity, 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)”.

The Transmission Agreement lasts 15 years, extendable up to five years, according to the September announcement.

Before the start of exports to Egypt under the Transmission Agreement, Chevron is allowed to divert volumes up to the minimum allotment to the Jordan North pipeline, according to the September announcement.

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 then.

“The flow of gas under the Transmission Agreement shall commence no later than 36 months from the date of fulfillment of the conditions precedent”, the September announcement 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 at the time.

Earlier this year the Leviathan partners requested an export permit for a recently amended agreement for their current exports 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 around 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.

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

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