Energy Ministry Considers LNG Facility Options

By Aryeh Stern

Sources close to the matter have informed Globes that Energy Minister Eli Cohen has initiated an examination of potential options for constructing a floating liquefied natural gas (FLNG) facility in Israel’s economic waters. However, concerns about pollution affecting coastal populations have cast doubt on the feasibility of a land-based LNG terminal, which is also under consideration.

Presently, Israel relies on three pipelines for exports: EMG to Egypt (with an annual capacity of 5.5 billion cubic meters), the North Jordan pipeline (with a capacity of 7 BCM) serving exports to Jordan and Egypt, and the South Jordan pipeline (with a capacity of 1 BCM) supplying the Dead Sea Works in Jordan. The forthcoming Hovev-Nitzana pipeline, expected to be operational within three years, will convey 6 BCM annually to Egypt.

The motivation behind establishing an FLNG or land LNG facility is to mitigate risk for Israel, given its significant gas exports reliance on Egypt — both as a consumer and for liquefaction in Egyptian LNG plants. An LNG facility enables the storage and export of natural gas worldwide, with LNG volume being six times smaller than natural gas.

Notably, the Leviathan partners, including NewMed Energy (45.33%), Chevron (39.66%), and Rastio Energies (15%), have been the first to explore the possibility of an LNG facility. Currently, Leviathan’s annual production capacity is 12 BCM, with plans to increase it to 14 BCM next year through additional pipeline infrastructure investment.

To justify such investments, the Leviathan partners seek approval from the Ministry of Energy and Infrastructure Petroleum Commissioner for a production and export plan ensuring a return on investment. This plan could involve expanding the use of Egyptian facilities and/or establishing a standalone LNG facility in Israel.

With Egypt utilizing only a fraction of its LNG capacity, the perception is growing that an alternative export route is necessary, potentially through an LNG facility in Israel. However, the considerable increase in FLNG construction costs over the past two years poses a significant challenge.

Building an FLNG facility in Israel’s economic waters is estimated to cost $7 billion. Cohen supports either the Leviathan partners or a consortium of Israeli gas players sharing the investment burden, while reaping the economic benefits of the facility.

Cohen highlights the potential of an LNG facility to maximize state revenues from gas exports, diversify export targets, serve as a political tool, and contribute to job creation. Additionally, he underscores Israel’s involvement in deciding LNG export destinations from Egypt, should gas exports to Egypt increase further.