Leviathan Postponement Could Be Disastrous for Israeli Economy

YERUSHALAYIM -

A postponement in drilling at the Leviathan well’s oil-bearing strata, scheduled to begin in December, has been postponed indefinitely, a development that could have major repercussions for Israel’s economy, Globes reported on Monday.

Industry sources disclosed that while no formal decision had been made yet, the $250 million operation will be delayed for at least six months.

“Israel’s oil and gas exploration industry has ceased to exist,” a major drilling equipment supplier told Globes.

Investment in developing Leviathan’s gas field has reportedly ground almost to a halt. These include the tender for choosing a floating production, storage and offloading (FPSO) ship. In addition, costly equipment for developing the gas field has been shipped out of Israel.

Leviathan’s partners — Noble Energy, Delek Group, and Ratio Oil Exploration —meanwhile would only say that there has been no decision to delay drilling.

If the postponement materializes, it could cause a natural gas shortage in 2015.

Noble Energy VP Eastern Mediterranean Lawson Freeman said recently that regulatory uncertainty was the main factor delaying Leviathan’s development. He cited the lack of an approved outline plan for bringing gas from Leviathan, without which development cannot proceed.

Another reason for delay: Leviathan’s partners are waiting for Antitrust Authority director general David Gilo’s decision on a suspected cartel in the licenses. The companies have invested over $800 million in Leviathan to date, mostly for drilling and planning the field’s development.

Leviathan has been facing other hurdles as well. The Atwood Advantage ultra deepwater drillship, slated for delivery in September to drill the well, is still docked in South Korea, and will probably not arrive before the second half of 2014. The ship was built to order for Noble Energy, after the rig that tried to reach the oil-bearing strata was forced to stop drilling at a depth of 6,500 meters because of high pressure disparities at the great depth.

Construction of the Atwood Advantage was completed in September. Noble Energy has committed to hiring the ship at a cost of $584,000 a day, and planned to first use the ship at Leviathan before moving it to other deepwater fields offshore from West Africa and the Falklands.

Noble Energy said, “We remain committed to the development of the Leviathan field and continue to work hard to advance the project.”