Partners Approve Israel's Leviathan Field

Leviathan Partnership has taken the final investment decision (FID), Delek Drilling said in a February 23 filing to the Tel Aviv Stock Exchange. The announcement came three days after Delek Drilling and Avner, both entities controlled by Delek Group, signed on a $2.5bn loan agreement with a consortium of banks, for the development of the gas field, $1.75bn of which is for phase 1A.

In the filing, Delek estimated phase 1A development costs at $3.75bn. The FID decision was made despite the fact that the project has so far signed only one meaningful gas supply agreement, with Jordan's national power company.

According to various reports, Israel and Jordan negotiated terms for a bilateral agreement covering a range of operational difficulties, from the interruption of gas supply to the possibility of terror attacks on infrastructure, particularly in Jordan. Israeli authorities refused to release any information and even to confirm that negotiations have taken place.

It is also unlikely that Noble Energy would have signed FID without being given a safety net in case the Israel-Jordan relationship sours. It is also expected that Noble Energy will farm out 10% from its 39.66% holding in Leviathan while remaining the operator of the field and thereby reduce its exposure to the project's geopolitical risks.

Ya'acov Zalel