Leviathan Partners Ink $35B Deal to Raise Gas Exports to Egypt

Chevron Corp. and its partners in Israel’s Leviathan gas and condensate field have reached an agreement with current buyer Blue Ocean Energy for an increase of 130 billion cubic meters (4.59 trillion cubic feet) in gas deliveries to Egypt.

The added quantities are expected to generate about $35 billion in revenue, majority stakeholder NewMed Energy LP said in a regulatory filing.

Under the amendment to the export agreement with Blue Ocean, the total volume for Leviathan exports to Egypt will be increased in two increments, first by around 20 Bcm and later by approximately 110 Bcm.

Under the first increment, the volume will increase from 450 million standard cubic feet a day (MMscfd) or about 4.7 Bcm per year to 650 MMscfd or about 6.7 Bcm per annum. The increase will start from the date Israel Natural Gas Lines Ltd. (INGL) completes a subsea pipeline between the Israeli cities of Ashdod and Ashkelon and the Leviathan consortium completes the field’s third pipeline, according to the NewMed filing.

Under the second increment, the volume will increase to about 11.9-12.9 Bcm per year. “It should be noted that this quantity was determined in consideration, inter alia, of the forecasted natural gas demand and supply of the Israeli domestic market, with the aim of guaranteeing the supply for the domestic market’s needs”, NewMed said.

The second increment is subject to the Leviathan co-owners reaching a FID (final investment decision) on the field’s expansion project (Phase 1B) and a transmission agreement with INGL for the delivery of gas to Blue Ocean on the Israel-Egypt border via the Nitzana pipeline. The Nitzana pipeline is part of a project approved by the Israeli government in May 2023 to build a new onshore connection between the Israeli and Egyptian gas transmission systems.

“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 expansion project [Phase 1B] and completion of the project for the construction of the Nitzana pipeline”, NewMed said. “To the sellers’ assessment, as of the report date, the said projects are expected to be completed in 2029”.

“According to the amendment to the export agreement, on the date of completion of the Ashdod-Ashkelon offshore section and the third pipeline project, the supply period shall be extended until 10 years after such date or until the date on which the Buyer shall consume the total contract quantity (i.e., including the first increment), whichever is earlier”, NewMed added.

“In addition, on the expansion date [the start of the supply of the increased daily quantity], the supply period shall be extended until 31 December 2040 or until the date on which the buyer shall consume the total contract quantity (i.e., including the second increment), whichever is earlier.

“If, at the end of the supply period, the buyer shall not have consumed the total contract quantity, the supply period shall automatically be extended until the date on which the buyer shall consume the total contract quantity, provided that the extension period does not exceed an additional two years”.

The entry into force of the amended agreement between the Leviathan partners and Blue Ocean is subject to conditions including regulatory approvals, NewMed said.

It said it had requested Israel’s Energy and Infrastructure Ministry for an export permit for the amended agreement.

NewMed, owned by Israel’s Delek Group, holds a 45.34 percent stake in Leviathan. Operator Chevron owns 39.66 percent through Chevron Mediterranean Ltd. Ratio Energies LP, also an Israeli company, has 15 percent.

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