"Fortune" magazine doubts whether Noble Energy Inc. (NYSE: NBL), as an independent oil company can develop the Leviathan gas field. The Leviathan 1 exploratory well has already reached the second target strata, where the 3D seismic survey found signs of oil. Noble Energy's partners in Leviathan are Delek Group Ltd. (TASE: DLEKG) and Ratio Oil Exploration (1992) LP (TASE:RATI.L).
In an article entitled, "Noble's cause: Can an independent manage Israel's Leviathan?", "Fortune" questions whether a smaller company such as Noble Energy can handle Leviathan. Noble Energy's market cap is $15 billion.
"Fortune" quotes an Argus Research Group energy analyst as saying that with Leviathan as the biggest find in Noble's history, the gas coming out of the Leviathan could mean a 15-20% increase in Noble's entire production level. "That's huge. Relative to what would have happened had oil giants such as Chevron (NYSE: CVX), Exxon Mobil Corporation (NYSE: XOM) or Royal Dutch Shell plc (NYSE; LSE: RDS) found it, it's much more meaningful."
"Fortune" points out that the big energy companies passed up on the chance to explore the Levant Basin where Leviathan was found, because they did not think that anything was there.
"Fortune" says that Leviathan is so big that it will be challenging for Noble Energy to develop it. "For example, Noble would have to liquefy the natural gas it drills at Leviathan in order to transport it to other countries...Noble Energy will probably have to fund some portion of a liquefied natural gas facility. If it didn't, it would have to use the gas from Leviathan for local energy in Israel. But Israel can already access enough gas to fulfill its natural gas needs in the short term due to the company's 2009 find in the Tamar gas field."
Husch Blackwell law firm partner Adv. Robert Attai told "Fortune" that getting the gas out of Israel will be challenging. The area is technically in a war zone. Every country around Israel would like to see it no longer exist," so he says they won't rush to help.
According to "Fortune", "Worst case scenario, a change in risk or an unexpected hole in Noble's pipeline could mean it would sell its stake before there's a massive profit margin on anything coming out of Leviathan.
"The company's main strength is its innovative approach to exploring somewhat riskier plays. But when the exploration phase is over, it's unclear who will ultimately reap the benefit of the find."
Published by Globes [online], Israel business news - www.globes-online.com - on January 20, 2011
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