The partners in Leviathan will be required to keep a guaranteed capacity of 9.2 billion cubic meters (BCM) of natural gas a year for the Israeli economy, under the terms of the license issued today by the Ministry of National Infrastructures. The license regulates the relations between the licensees and the government over the gas field's 30-40 year lifespan.
The licenses for the Rachel and Amit licenses will be called Leviathan North and Leviathan South, each covering 250 square kilometers, encompassing the gas field. Leviathan's partners are Noble Energy Inc. (NYSE: NBL), Delek Group Ltd. (TASE: DLEKG), Ratio Oil Exploration (1992) LP (TASE:RATI.L) and, shortly, Woodside Petroleum Ltd. (ASX: WPL).
As "Globes" revealed yesterday, the Ministry of National Infrastructures requires the partners to keep in reserve a much greater capacity than is needed by the domestic market under current projects. This is a lesson from the cutoff of Egyptian natural gas: the ministry did not foresee the cutoff of deliveries, forcing the Tamar gas field developers to build an unplanned pipeline to supply all of Israel's gas needs on its own.
The ministry's requirement means that the partners in Leviathan will not be able to export gas that will cause the capacity to the domestic network to fall below the 9.2 BCM threshold. Therefore, the partners will have to expand their plan for a 16 BCM annual production capacity if they want to export more than 7 BCM of gas a year from Leviathan.
The license requires the licensee to build gas production and delivery systems to the Israeli coast to supply 1.4 million cubic meters of gas a day (12 BCM a year). It includes a clause, which the partners object to, allowing the Petroleum Commissioner to order the licensee to expand the production and delivery systems and add a terminal to boost delivery capacity above 1.4 million cubic meters a day to ensure safe, reliable and efficient delivery to Israeli consumers. The partners want the government to help finance this requirement through government guarantees or by other means, but the license makes no mention of this.
The government also rejected the partners' request to reduce the $100 million guarantee to ensure they meet the terms of the license.
The license states that in the event of a natural gas shortage in Israel, the licensees will prioritize domestic needs over supply capacity that is not subject to contractual sale commitments that are valid at the time. The Ministry of National Infrastructures accepted the partners' position that allowing the Petroleum Commissioner to intervene in contracted deliveries would make it more difficult to sign export contracts.
The partners in Leviathan will submit a development plan within six months from receiving the license.
Other important conditions of the license include:
In line with guidelines set by the Petroleum Commission, after consultations with the Ministry of Environmental Protection, the licensees will prepare a marine environment monitoring plan for development of the Leviathan field. They will submit the plan to the commissioner, who will approve it in writing, after consultations with the Ministry of Environmental Protection, after which the licenses will implement the plan as fast as possible.
A licensee will prepare, in line with guidelines from the Petroleum Commissioner, after consultations with the Ministry of Environmental Protection, an environmental impact statement, which will state the results of the monitoring and will detail the environmental effects, including on the seawater, seabed, air, and natural values of the licensee's activity. The statement will include recommendations about the guidelines and means to minimize possible effects from the licensee's activity. It will also include instructions for rehabilitation when the license expires and recommendations for environmental monitoring and other documents for the following stages that will determine the detailed construction plans for various facilities, depending on where they are built.
To promote the training of skilled Israeli workers in the energy industry, and in line with the ministry's training activity, the licensees will, within six months, submit a detailed plan that will include methods, targets, timetables, and milestones for employing Israelis in the development work, installation, and operation of Leviathan's production systems.
The Petroleum Commission has the right to order the licensee to give to another licensee, without discrimination, handling services, lowering of pressure and transportation for payment, subject to safety considerations and legal provisions. This will facilitate the hook-up of small gas fields as quickly as possible to the national gas pipeline network.
Published by Globes [online], Israel business news - www.globes-online.com - on March 27, 2014
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