State-run Israel Electric Corp. (IEC) has chosen the Leviathan gas field off Israel's Mediterranean coast for a short-term natural gas supply deal, saying it would lower its costs by up to $175 million.
Leviathan will supply about 4 billion cubic meters of gas once production begins this October until June 2021, although IEC said in a statement there was no minimum purchase requirement.
The deal with Leviathan, which is subject to various approvals, will apply to gas quantities that exceed its minimum it is obligated to buy from the Tamar gas field.
It noted that it has been working to reduce its fuel costs as well as electricity rates and the new deal will save an estimated $145 million to $175 million.
Gas supply after 2021 will come from the Karish field—owned by Energean—once that field comes online.
Leviathan, discovered in 2010 about 120 km (75 miles) off Israel's coast, is one of the world's largest gas discoveries of the past decade. The project operator, Texas-based Noble Energy , owns a 39.66% stake. Delek Drilling holds 45.34% . The nearby Tamar gas field began producing in 2013.
The deal would create the largest pure-play northern Midland Basin E&P with a 73,000-net-acre position and 12,000 boe/d of production that is expected to more than double through 2020.
In an unpredictable market, newly minted E&Ps have abandoned the old models of building ready-to-drill assets and instead are forging ahead with new models, operating strategies and leaders.
The agreement calls for the delivered ex-ship supply of 1.6 million tonnes per annum (MTPA) for a base term of 17 years from the commercial start date, according to a news release.