Israel's gas reserves near export threshold

The gas reserves are close to the 950 BCM minimum for exports to be allowed under the Tzemach Committee recommendations.

Israel's natural gas reserves are nearing 950 billion cubic meters (BCM), the threshold quantity for allowing exports under the Tzemach Committee recommendations. The figure is based on the revised estimate of gas at the Leviathan reservoir and an optimistic forecast for the expected discovery at the Karish prospect.

Last Thursday, Leviathan partner Noble Energy Inc. (NYSE: NBL) announced that it was revising upward the amount of gas in the reservoir from 17 TCF (trillion cubic feet) to 18 TCF following analysis of the results of the Leviathan 4 appraisal well, the drilling of which was completed a few days before. The company also announced that the Karish prospect in the Alon C license has a pre-drill gross mean resource estimate of 3 TCF. The Ensco 5006 rig, owned by Ensco plc, which drilled the Leviathan 4 well, will be relocated to the Karish prospect within days to drill an exploratory well.

Noble Energy owns 39.67% of the Rachel license, part of the Leviathan reservoir, and Delek Group Ltd. (TASE: DLEKG) units Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L) each own 22.66%. Noble Energy owns 47.06% of the Alon C license, and Avner and Delek Drilling each own 26.47%.

The new government, after it is formed, will have to decide whether to accept the recommendations of the inter-ministerial committee on gas policy, chaired by Ministry of Energy and Water director general Shaul Tzemach. The committee's final report, submitted on August 29, recommended allowing the export of up to 50% of gas from any reservoir, with the option of increasing the proportion to 75% by trading in export rights with other reservoirs. On the basis of these recommendations, Australia's Woodside Petroleum Ltd. (ASX: WPL) agreed to acquire 30% of the rights to Leviathan for $1.25 billion. Woodside president and CEO Peter Coleman said last week that he was certain that the deal would be closed, even though the Israeli government has not yet approved the Tzemach Committee recommendations.

The Tzemach Committee assumed that Israel's natural gas reserves would permit the export of up to 500 BCM of gas while keeping a national reserve of 450 BCM, which will meet Israel's domestic needs for 25 years. At the time of the report, Israel had 800 BCM in proven gas reserves, but the committee's estimate assumed that at least an additional 150 BCM of gas would be discovered with a 90% chance of success. The estimate has been the target of growing criticism since the failure of the Myra and Sarah wells and the disappointments from the Shimshon and Ishai wells.

Noble Energy's revised estimate for Leviathan and Karish increase Israel's gas reserves by an additional 120 BCM. Noble Energy and Delek also own eight licenses, in the Alon and Ruth bloc of licenses, which have not yet been drilled. Energy exploration industry sources estimate that additional gas reserves will discovered at these licenses which will boost Israel's reserves above the 950 BCM threshold.

Published by Globes [online], Israel business news - www.globes-online.com - on March 10, 2013

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

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