ONGC Videsh eyes stake in Israel’s Leviathan gas project

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New Delhi | Published: December 26, 2014 12:50:44 AM

ONGC Videsh (OVL) is eyeing a stake in the prolific Leviathan gas project off Israel's Mediterranean...

ONGC Videsh (OVL) is eyeing a stake in the prolific Leviathan gas project off Israel’s Mediterranean coast, in what could mark the entry of the state-run firm into the Western Asian nation.

“OVL would like to participate in the Leviathan fields and other blocks offered for farm-in in Levantine basin in Israeli waters. Since India has been importing crude oil from West Asian countries such as Iran, Iraq, Kuwait and Saudi Arabia, opportunities in Israel were not pursued so far,” said an official.

The government-owned company, which has operations in 16 countries and invested over $22 billion till March 31, 2014, has sought guidance from the petroleum ministry to pursue exploration and production (E&P) investments in Israel.

Leviathan, discovered in 2010 off Israel’s Mediterranean coast, is poised to be the world’s largest gas find in recent times and production is slated to commence in 2017. In July, according to reports by consultant Netherland Sewall & Associates (NSAI), the reserve estimate was revised to 21.93 trillion cubic feet from 18.91 tcf earlier.

In May, Australia’s second-biggest oil and gas producer Woodside Petroleum decided to scrap an agreement to buy 25% in Leviathan project for about $2.6 billion. In this project, Texas-based Noble Energy is the operator with 39.66% stake. Avner Oil and Delek Drilling — subsidiaries of the Delek Group (Israel’s dominant integrated energy company) — hold combined 45.34% and remaining 15% is held by Ratio Oil.

Israel has traditionally been an energy importer with relatively minor oil and gas reserves. But since 2009, giant gas discoveries have transformed the country’s energy sector. Tamar (with reserves of 10 tcf) was brought on stream in 2013 and is expected to meet the bulk of Israel’s domestic demand. In June 2013, Jerusalem had approved gas exports. About 60% of gas discovered till date, around 19 tcf, will be reserved for the domestic market, while the rest would be exported. All fields will incur a domestic market obligation (DMO), but there will be flexibility to swap or trade DMOs, which should make sufficient gas available from the Leviathan field to support an export project, said the official.

Despite long-awaited government approval, generating value from Leviathan and future discoveries will not be straight forward. Complex political relationships between neighbouring countries make piped exports difficult. A lack of available and suitable land may also preclude the construction of an onshore LNG facility.

OVL managing director NK Verma refused to comment on buying stake in Israel’s Leviathan gas project. Verma, however, said the explorer is continuously scouting for prolific assets in several geographies. OVL targets to increase its output manifold to 60 million tonnes of oil equivalent (mtoe) by 2030 from 8.36 mtoe currently.

The acquisition of prolific assets overseas that are in producing state or expected to commence shortly are utmost priority as petroleum minister Dharmendra Pradhan looks to cut down India’s ballooning crude oil import bill and move towards energy security. India’s crude oil import bill has skyrocketed from $112.1 billion in FY11 to $155.7 billion in FY14.

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