Noble Considers Selling 15 % of Leviathan Gas Field

April 2016, Vol. 243, No. 4

Though a game-changing gas discovery for Israel and for the discoverer, Texas-based Noble Energy, the giant Leviathan offshore gas field in the Eastern Mediterranean has been one bureaucratic headache after another. Now reports are surfacing that the company is seeking to reduce exposure by selling 15 percent of its 40 percent interest in the project.

Noble Energy discovered the Leviathan deposit back in 2010: a field that holds an estimated 17 trillion cubic feet of natural gas and can turn Israel into not just a self-sufficient nation in energy terms, but also into a large exporter of gas. It could, were it not for legal and political issues that have put spokes in the wheels of the project since its inception.

Noble has partnered with Israeli energy companies Delek Group, which holds 45 percent in the project, and Ratio, with 15 percent, for the development of Leviathan. The total cost of the project has been calculated at $6.5 billion. However, the partnership between Noble and Delek has raised doubts about a budding energy monopoly that has resulted in legal opposition to the project’s approval and a series of delays.

The problem, as the Israeli courts (and public) see it, is that Noble and Delek control most of Israel’s gas deposits. So, judges and parliamentarians have been trying to come up with ways to break the monopoly before it becomes a reality. Near the end of last year, the Israeli government struck a deal with Noble for the latter to sell 11 percent of its 36 percent holding in another huge gas field, Tamar (already producing), as one of the conditions to let the Leviathan development move forward. This was on the positive side.

This March, however, Israel’s High Court ruled against a stability clause proposed by the country’s government. The clause basically aims to appease the project participants that their investment will not go to waste, by guaranteeing returns over the next ten years. The court said the incumbent government did not have the powers to bind future governments to such an obligation. Parliament now has one year to find a better alternative, otherwise the project is unlikely to move forward at all.

Truth be told, the news comes at a time when Noble is in serious need for cash, after reporting a net loss of $2.03 billion for the last quarter of 2015.

The company plans to spend $1.5 billion on exploration this year and earlier told media that it was looking to “monetize” some of its assets. In short, this is not the time for major investments, such as the ones that Leviathan will require. This is particularly true in light of the opposition surrounding the project and the uncertainty lingering over it with no prospects of clearing soon.

By Irina Slav for

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