Noble CEO confirms Leviathan delay

Charles Davidson: The deepwater drillship built to drill to Leviathan's oil-bearing strata will be sent to another site.

Development of the Leviathan natural gas field will be delayed by at least one year, said Noble Energy Inc. (NYSE: NBL) CEO Charles Davidson told the Bank of America Merrill Lynch 2013 Global Energy Conference on Thursday. His remarks confirm reports by "Globes" over the past few weeks. He also disclosed that the deepwater drillship built to drill to Leviathan's oil-bearing strata will be sent to another company site elsewhere in the world, which will delay the well indefinitely.

Davidson leveled implied criticism at the Israeli government conduct on the matter. "After an unbelievably long period, we received the OK of the Israeli government for exports. I couldn’t believe that it took so long," he said, adding that multiple meetings were needed with Prime Minister Benjamin Netanyahu to explain the significance of the delays in granting the necessary permits. "I was impressed that the Supreme Court made a decision the day after hearing the parties, but the delay did push back Leviathan about a year."

Development of Leviathan is critical for the Israeli economy, because without the hookup of a second natural gas field to the shore, Israel will face a gas shortage by next summer. Electricity consumers are still paying the price for the more than NIS 20 billion in damage caused by gas shortage that resulted by the cutoff of Egyptian gas.

However, to begin Leviathan's development, Noble Energy and its Israeli partners, Delek Group Ltd. (TASE: DLEKG) and Ratio Oil Exploration (1992) LP (TASE:RATI.L), need to obtain a license for the field from the Ministry of National Infrastructures and know where the onshore terminal will be built. The Ministry of the Interior believes that the final decision on the terminal's location will be made in the summer of 2014, a year behind Netanyahu's target date. Meanwhile, Leviathan's partners cannot begin negotiations on gas sales to Israeli customers because Antitrust Authority director general David Gilo has not yet decided whether the Leviathan and Tamar gas fields, which are both owned by Noble Energy and Delek, constitute a cartel.

Changing plans

Hundreds of millions of barrels of oil may be found beneath Leviathan gas-bearing strata. Last week, "Globes" reported that the drillship, which was scheduled to arrive at the field in the first quarter of 2014, has been indefinitely delayed. The drillship is still at the South Korean shipyard. "You may have heard the media reports that we have postponed the arrival of the drillship which is intended to reach the deep strata," said Davidson, explaining that the drillship's delay was directly linked to the delay in the development of the gas field. "Guess what - we won't bring a drillship to drill a $250 million well when we won't have a complete drill plan for it. We've started the preparations to send the platform to another site in our program."

As for gas exports, Davidson said that Egypt's natural gas shortage, which has caused a shortage in Jordan, has fundamentally changed gas export plans for Leviathan. "We used to think that that we'd export it all as LNG, [but] we've seen radical changes in Egypt, which have created for us an opportunity to sell gas regionally. There are two LNG facilities in Egypt which are suffering severely and are seeking gas suppliers. In Jordan, we're in contact with industrial customers. I'm excited that Noble Energy can supply more gas at lower costs. Gas flow via pipeline requires a smaller capital investment, and it's a simpler system. We'll also have an LNG component, whether at an onshore plant in Cyprus or a floating plant, but it will have few trains than we originally planned."

Published by Globes [online], Israel business news - www.globes-online.com - on November 25, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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