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Page 1: Israel   oil & gas investor magazine (november 2009)


Page 2: Israel   oil & gas investor magazine (november 2009)
Page 3: Israel   oil & gas investor magazine (november 2009)

Israel is the Biblical land of milk and honey,and now it’s the modern-day land of milk,honey and natural gas. For in deep waters off-shore Israel, in the virtually unexplored Levan-tine Basin, Houston-based Noble Energy Inc.has discovered a monster gas field.

Indeed, Tamar is the second-largest naturalgas find in the world since January 2008, be-hind only Petrobras’ subsalt Jupiter discoveryoffshore Brazil.

Tamar, stuffed with some 6.3 trillion cubicfeet (Tcf) of recoverable gas, was spudded byNoble and its partners, Delek Drilling, IsramcoNegev-2, Avner Oil and Dor Gas Exploration,in November 2008. To drill the immense andhugely tempting prospect, Noble had to entice adeepwater rig from offshore West Africa totravel to the eastern Mediterranean.

Noble took a farm-out on Tamar after theprevious operator elected not to drill. The quar-tet of Israeli companies held two licenses—Matan and Michal—but had no illusions theycould themselves drill risky, rank wildcats insome 5,500 feet of water.

The Israeli firms needed an experienced, fi-nancially sound and technically advanced off-shore operator, and Noble fit the bill.

In-country historyNoble had been active in Israel since 1998,

when it entered the country via a farm-out. It

drilled a successful test on the Noa prospectin the eastern Med in 2,500 feet of water in1999, and followed that in 2000 with the dra-matic 1-Tcf Mari-B discovery. That prospectwas drilled on the Ashqelon license, 15 milesoff the coast of southern Israel in 800 feet ofwater.

Mari-B ushered Israel into the natural gasage. With the discovery, the country suddenlyhad a domestic supply of the clean, environ-mentally friendly fuel. Noble and its partners,Delek Drilling and Avner Oil, developed thefind through their Yam Tethys partnership, andat the same time began to nurture a national gasmarket.

Mari-B was a one-off prospect, however.British Gas had made its Gaza Marine find thesame year, just across the border between Israeland Gaza. The two Pliocene discoveries in-spired a fresh look at the potential of the Levan-



American independent Noble Energyhas discovered a world-class naturalgas field offshore Israel, changingboth its fortune and the fortunes ofits host country.












0 50 Miles

0 100 Km


Tel Aviv


















40 ▪ November 2009

Overleaf, NobleEnergy’s Mari-Bproductionplatform isIsrael’s loneoffshore facility.Below, only about400 wells havebeen drilled inIsrael’s onshoreand offshorelands to date.Below right, theHouston-basedindependentdiscovered giantTamar Field inearly 2009, insubsaltreservoirs inwater depths of5,500 feet. Topright, Israel’snatural gas age isjust beginning.











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tine Basin, but there were no more analogousprospects.

After its Mari-B success, Noble continued topursue other ideas offshore Israel. It drilled itsrank Hanna-1 wildcat in 2003. “It was dry, butwe found out some interesting things,” saysSusan Cunningham, senior vice president, ex-ploration. “So when Tamar became available in2006, we were already established in the coun-try, we had operational experience, and we hadseen some encouraging signs.”

The Tamar opportunity was hardly a slam-dunk, however. Previous operator BritishGas had decided against drilling Tamar,

and thoughts around the oil patch were that thetest would likely encounter extreme pressuresand be quite expensive.

“Drilling risks were anticipated to be veryhigh,” says Cunningham.

Noble took the Tamar farm-out anyway. Theprospect was just too tempting: it presented as a

huge four-way structure cut by faults. It was afairly simple concept of good-quality Miocenereservoir sands draped across an immense fea-ture. The rub was that it was subsalt, lyingbelow some 5,500 feet of tabular evaporites.Mari-B and Gaza Marine were both supra-saltfinds, so there was no precedent for a testbelow the thick salt layer. Undeterred, Nobleassumed operations and took a 33% workinginterest; its current interest in the find is 36%.

The independent was also concerned aboutpressures, but through painstaking geophysicalwork it became convinced that the accumula-tion would actually be normally pressured. Pre-drill, it considered the biggest risk to bereservoir. Just one offshore test, Noble’s ownHanna-1, had encountered some reservoir rocksof equivalent age.

Deepwater contractors were understandablyreluctant to bring a premium rig to the easternMed for just one well. Noble had to packagesome West African wells with the Israeli one tobolster its chances, and it finally secured a com-mitment from Atwood Oceanics Inc., Houston.

Noble also worked closely with another oper-ator active in West Africa, Kosmos Energy, toensure that if Tamar did hit, Noble could retainthe rig for another prospect, Dalit. Noble’s Is-raeli partners had to make sizeable commit-ments as well. “It was a good, integrated effortthat made everything happen,” says DavidStover, president and chief operating officer.

The initial Tamar well cost $140 million andwas drilled in 5,500 feet of water some 57miles from shore to a depth of 16,076 feet. Itencountered more than 460 feet of net pay inthree fabulous Miocene reservoirs. The discov-ery tested 30 million cubic feet of gas a day,constrained by facilities. Production wells willeach be capable of making 150 million a day.

The feature covers an astonishing 25,000acres and boasts a total gas column of 840 feet.Noble and its partners completed the well inJanuary 2009.

November 2009 ▪ 41

David Stover, top,Noble Energypresident andchief operatingofficer, andSusanCunningham,below, seniorvice president,say Noble’sgroundwork inIsrael with its2000 Mari-Bdiscovery andsubsequentexplorationprepared the wayfor its stunningsuccess atTamar.

Top of page, Tel Aviv is the heart of Israel’sgrowing economy. Below, a local bird made astop at Mari-B, Noble Energy’s offshoreproduction facility in the easternMediterranean.

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42 ▪ November 2009

Post-discoveryImmediately after making the Tamar discov-

ery, Noble moved the semisubmersible AtwoodHunter to the Dalit prospect. Dalit was on theMichal license, some 28 miles from shore in4,500 feet of water. At 12,000 feet total depth,it was still subsalt but was shallower and a farsmaller feature than Tamar. The license waspart of the original Tamar farm-out and inter-ests were identical to those in Tamar.

Dalit was a discovery as well. The wellborecut more than 110 feet of very high-qualityMiocene pay and it flowed 33 million cubicfeet per day on a facilities-constrained test.Noble estimated a production well would be ca-pable of making 200 million a day, and thatDalit’s recoverable reserves were half a Tcf.

Then, the operator went back to Tamar anddrilled a 16,880-foot appraisal well in 5,530feet of water some 3.5 miles northeast of thediscovery. “It came in right as predicted,” saysCunningham. Noble cored the appraisal, whichwas positioned on the flank of the structure. Re-

sults were superb, and Noble raised its estimateof recoverable gas to 6.3 Tcf for the Tamarstructure alone. Furthermore, the gas is pre-mium quality—it’s almost entirely methane,with virtually no impurities. “It’s ready toburn,” says Stover.

And, Noble is not done yet. After it took theTamar farm-in, it picked up quite a bit of neigh-boring acreage. “We wanted to be able to havefollow-up running room if Tamar and Dalitworked out,” says Cunningham.

All told, the company holds 3 million grossacres in the Levantine Basin. The Tamar andDalit discoveries were both drilled on preexist-ing 3-D seismic control. Noble is now shooting1,200 square miles of new state-of-the-art 3-Dseismic on portions of its acreage to flesh outpromising leads already highlighted on 2-Ddata.

Corporate viewCertainly, the discoveries at Tamar and Dalit

are fabulous. Tamar is easily the largest discov-

Chuck Davidson,Noble Energychairman andchief executive,says the Tamardiscovery willtransform bothhis company andIsrael’s energysector. Above,six wells at Mari-B Field candeliver 600million cubic feetof gas per day.Right, the highflow ratestranslate to veryattractiveoperating costs.

Page 6: Israel   oil & gas investor magazine (november 2009)

ery in Noble’s long and successful history.“It’s not very often you get to be part of an

exploration venture that has the potential to dra-matically change a country’s energy supply,”says Chuck Davidson, chairman and chief ex-ecutive officer.

Indeed, the early news from Tamar was sogood as to invite incredulity. There was sand,lots and lots of thick, gas-charged sand. “Wekept telling ourselves, it can’t be that good.Those first few days and even weeks we spent alot of time going through the list of things thatmight be problems,” says Davidson. “We keptasking ourselves, what don’t we know yet, andwhat could go wrong?”

Tamar was absolutely that good, and it goteven better after the appraisal was drilled.

On a gross basis, Noble and its partners havealready invested close to $300 million in the re-cent drilling campaign. Development costs willultimately run upward of $2 billion gross.

Noble envisions Tamar as a subsea develop-ment. Many of these have been done in the

deepwater Gulf of Mexico, but Tamar will bequite challenging because the tieback will beexceptionally long, volumes will be colossal,and the project life will be drawn out due to thesheer size of the resource.

“Tamar is a transformational change forNoble Energy. Through these discoveries weare putting legacy-type assets into our portfo-lio,” he says.

Noble is now managing gross develop-ment projects of more than 2 billionbarrels equivalent; in the last two and a

half years, the company has discovered net re-sources of more than 700 million barrels in Is-rael, the deepwater Gulf of Mexico, andoffshore West Africa. That’s equivalent to 80%of what Noble had on its books as proven re-serves at the end of 2008. The new resourceswill flow on its books as projects are sanctionedand developed.

And, the very sizeable opportunities that areyet to be drilled on its extensive acreage posi-tion offshore Israel could mean more reserves

November 2009 ▪ 43

Noble Energybrings its Mari-Bgas onshore at areceivingterminal atAshdod, insouthern Israel.Noble and itsIsraeli partners,Delek Drilling andAvner Oil,developed Mari-Bgas through theirYam Tethyspartnership.

Page 7: Israel   oil & gas investor magazine (november 2009)

for Noble and much more gas for Israel.Noble’s net remaining undeveloped acreage inthe eastern Med is close to the size of 250 Gulfof Mexico blocks, so it’s within the bounds ofpossibility that Tamar could be the foundationof a thriving gas province. “If we should be sofortunate as to make additional discoveries,then we are looking at more opportunities forthe entire region,” says Davidson.

“I’m hopeful that in the end offshore gas willeliminate completely Israel’s need for importedoil for distillate or bunker fuel to generatepower,” he says.

“Tamar is a game-changer for Israel, forNoble Energy and for our partners. Our role isto make sure it happens.”

Partner perspectiveSuccessful international operators often em-

phasize the importance of a strong local part-ner. Noble came into Israel as a partner with thebroader Delek Group Ltd., a Netanya, Israel-based energy and infrastructure group. Delekhad specifically solicited Noble because of itsoffshore abilities, and Delek in turn has pro-vided the partnership in-country expertise andrelationships and helped in the interface withcustomers and government, from Noble’s firstwell to today.

“It’s a partnership that has worked well forus, and we have expanded to other areas of theworld with Delek as well,” says Noble’s David-son. “It’s rare that a partnership lasts beyond adiscovery, let alone stays together for two dis-coveries nearly a decade apart.”

After the success at Mari-B, Delek reachedinto E&P in other regions, including Vietnam,Russia, Africa and the North Sea. In the U.S., itacquired upstream player Elk Resources, basedin Denver, and a 60,000-barrel-per-day oil re-finery in Tyler, Texas, in 2008. Delek sub-

sidiaries own and operate some 1,600 gas sta-tions and convenience stores throughout theworld. In Israel, the group leads the automotivebusiness, holding between 26% and 28% of themarket. It was also the first to build an indepen-dent power plant in Israel. Delek’s strategy is tobe in the whole cycle of energy production.

Now it has Tamar. “Tamar is very importantand very significant to us,” says Gabi Last,chairman of Delek Group. “We are dreaming ofa future for Israel where we will use the gas forelectricity generation, and also have enough tosell to private houses and as CNG for vehicles.”

But the decision to drill Tamar was not aneasy one. The well was very costly, and lastyear was particularly difficult for Delek as wellas for other companies, due to the world finan-cial crises. “It was a major investment, and wehad sleepless nights. On the other hand, we hadour belief in Noble,” says Last.

The Tamar discovery has changed the bal-ance in the group. The energy sector has gainedin importance, and the company is more fo-cused on the Israeli market. “We came througha difficult year in 2008, and now all our sectorsare profitable,” he says. “And in the future, be-cause of Tamar, the E&P sector will be one ofthe leading profitable businesses in the group.”

To further strengthen its upstream position,in August the Delek board of directors ap-proved the purchase of up to $218 million ofNoble Energy shares.

“Noble has been on budget, on time, andvery professional,” says Last. “We are veryhappy to be its partner.”

Future plansAfter the Tamar discovery, Noble shifted

$100 million of its 2009 capital program to Is-rael to cover its costs on the Dalit and Tamarappraisal wells. This year, Noble’s total spend-

44 ▪ November 2009

Gabi Last,chairman ofDelek Group,says thediscovery of gasat Tamar hasfulfilled a dreamof secure energysupplies forIsrael. Above,functions ofcontrol-roommonitors at IsraelElectric’s Eshkolpower station,the firstcustomer forMari-B offshorenatural gas, areexplained tovisitors.

Page 8: Israel   oil & gas investor magazine (november 2009)

ing in Israel will be close to $140 million, about10% of its total budget.

The company expects to bring another rigback in during the second half of next year anddrill through 2011 on both exploration and de-velopment wells.

On Tamar itself, its immediate challengeis reaching an agreement with the gov-ernment on the appropriate place to

bring Tamar gas onshore. Coastal real estate isprecious in Israel, and several options are beingconsidered. One scenario has the gas comingdirectly onshore to a new terminal; another op-tion is to feed the gas through the existing in-frastructure associated with the Mari-B project.A factor that will become clearer after comple-tion of the new 3-D survey is the location of themost promising undrilled structures, and wherethey sit in relationship to Tamar.

Israel has become so significant to Noble thatthe company is scaling up a major project teamfor the country. Indeed, Israel is one of the veryjuicy fruits of an effort that Noble launched in2005, after it completed its acquisition of PatinaOil & Gas Corp. At that time it decided to refo-cus its exploration efforts on high-impact pro-jects that could make a material difference tothe company.

“Tamar has validated that strategy: we havemade multiple discoveries in Israel, we have alot of running room and we have an existingproduction base,” says Stover.

State of IsraelThe impacts of Tamar on Israel are also far-

reaching and significant.“The Tamar discovery provides us the oppor-

tunity to independently grow our energy supplyfor the next 20 to 25 years,” says Uzi Landau,Israel’s Minister of National Infrastructures. “Itwill be possible to use this gas for our power

production, for industries and hopefully also fortransportation.”

Israel is already on the path of expanding nat-ural gas use. The country has been rapidly shift-ing its power-generation sector from relianceon fuel oil to natural gas. Today, up to 40% ofIsrael’s electric power is generated from naturalgas, versus none in 2003. “We also expect 70%of our industries to use natural gas by 2013,”says Landau. On top of that, more tenders arecoming to expand Israel’s nascent pipeline gridto cover 90% of the country.

The government is engaged in a structural re-form of the monopoly of Israel’s electric sector,and it is encouraging independent power pro-ducers. In addition to natural gas, Israel is advo-cating renewable energy, including wind andsolar projects.

“We have been dependent on imports for allof our energy. Now, with Tamar natural gasand renewable energy, we will substantially re-duce our dependence on foreign energy suppli-ers,” says Landau.

Balancing the desire for domestic energy isthe practicality of stable and diverse suppliers.Currently Israel has just two gas suppliers, theYam Tethys partnership that supplies Mari-Bgas, and East Mediterranean Gas, which im-ports Egyptian gas into Israel via pipeline. “Ontop of that we have a tender for an LNG regasi-fication plant,” he says. “This will provide oureconomy more access to natural gas.”

November 2009 ▪ 45

Above and left,up to 40% ofIsrael’s electricpower iscurrentlygenerated fromnatural gas.Israel Electrichas convertedexisting boilersto dual fuel,added new gasturbines and putin combined-cycle facilities.

Uzi Landau,Israel’s Ministerof NationalInfrastructure,says Tamar’snatural gas andrenewableenergy willsubstantiallyreduce thecountry’sdependence onforeign energysuppliers.

Page 9: Israel   oil & gas investor magazine (november 2009)

Onshore Israel comprises about 21,000square kilometers, and its ExclusiveEconomic Zone is 25,000 square

kilometers. About 400 wells have beendrilled in the country, mainly onshore.

Israel distinguishes three levels ofpetroleum rights.

The lowest level is the permit, and it givesthe owner 18 months to make a fairly super-ficial reconnaissance of the area, includingthe acquisition of new seismic data in placeswhere data are lacking. After 18 months, thepermit holder must submit a report to thepetroleum commissioner that includes rec-ommendations for specific prospects and ap-plication for a petroleum license.

The license is the next level of rights. Itsarea cannot exceed 400 square kilometers,and the term is for a maximum period ofseven years. The license holder has to drill awell during the term. If a commercial dis-covery is made, the company can then applyfor a lease. Most of Israel’s onshore and off-shore areas are currently under license.

Israeli petroleum leases cover up to 250square kilometers (equivalent to about adozen Gulf of Mexico blocks) and are givenfor a maximum period of 50 years, duringwhich the owner of the lease should continu-ously produce either oil or gas.

Since the discovery of Mari-B a decadeago, interest in Israeli waters has increased.That was due to the discoveries and also dueto seismic surveys in deeper waters thatshowed the Tamar and Dalit structures.

“The two discoveries of Tamar and Dalithave opened a new era in the state of Israel’sprospecting because the strata that were en-countered have excellent reservoir proper-ties,” says Yaakov Mimran, petroleum

commissioner, Ministry of National Infras-tructures. “We have definite reasons to beoptimistic.” Not surprisingly, enthusiasm hasspiked again since the discovery of Tamar.

Israel’s petroleum rights are all owned bythe state. Royalties are fixed at 12.5% of theproduced petroleum, either oil or gas. In the1980s, Israel privatized the industry, and thestate no longer participated directly in explo-ration or production. Rather, it encouragesprivate companies to explore.

“We try to encourage investors to come toour waters,” he says. “We supply as much ofthe basic material and interpretations as wehave.” All data that are not under existingpetroleum rights are free to investors, andthe ministry supplies its own interpretationsand leads as well.

In addition to its world-class gas discov-ery, Israel has another reason for optimism.“There were noncommercial discoveries ofoil offshore in the 1970s,” says Mimran.“The potential is there. Now, with today’ssophisticated technology and knowledge,things could change.”


Yaakov Mimran,Israel’spetroleumcommissioner,says Israelencouragesinvestors tocome to Israeliwaters. Interesthas spiked sincethe Tamar andDalit discoveries.

Rodney Cook,senior vicepresident, saysNoble is movingforwardaggressively toget the Tamargas contracted.Facing page, top,Jerusalem is thespiritual core ofsome of theworld’s majorreligions. Below,the Western Wallis the site of theancient Temple.Jewish traditionteaches that theTemple Mount isthe focus ofCreation. TheSecond Templewas razed byRoman legionsmore than 1,900years ago.

For companies interested in investments inIsrael, either in its emerging upstream or estab-lished industrial sectors, there are many posi-tives to consider.

“We offer a stable and growing economy.We have an efficient, well-regulated bankingsystem, and our legal system is transparent,”says Landau. “And our greatest advantage ishuman capital. We have a sophisticated, well-trained, innovative workforce. Whatever onemight find in the most advanced Westerneconomies one can find here in Israel.

“There are growing hopes that we shall havemore discoveries in the vicinity. If this happensin the future, Israel could be more than a con-sumer. We could possibly even become an ex-porter of gas.”

Opening an industryNoble’s Mari-B discovery was the first green

shoot of Israel’s gas industry, and the start of afundamental change in Israel’s energy supply.Noble had its Tcf gas discovery, but Israel hadno gas laws, no gas infrastructure and no gasmarkets.

“We took Mari-B from discovery to produc-tion in four years, in a country with no infras-tructure whatsoever,” says Stover.

The Mari-B platform can deliver 600 milliona day. The wells are horses: just six comple-tions, composed of five dry trees and one sub-sea well, can make all that gas. The high flowrates have allowed Noble to hold operatingcosts to less than 25 cents per thousand cubicfeet (Mcf), with a development cost of less than50 cents per Mcf.

And, the company has been actively building

46 ▪ November 2009

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November 2009 ▪ 49

well. The partnership has courted industrialcustomers, including a new crop of independentpower producers. “We are moving forward ag-gressively to get the Tamar gas contracted,”says Cook.

“Our plan is to penetrate industrial markets,and that will be aided by Israel’s push to extendpipelines into its interior,” says Smith.

Noble can sell directly to high-pressure cus-tomers, such as paper mills, refineries, desalina-tion plants and chemical manufacturers. Anumber of customers that consume from 5- to20 million cubic feet per day are also looking atcogeneration, which promises to be very big inIsrael. Low-pressure customers will (onehopes) be served by an emerging local distribu-tion company sector. Tenders for Israeli LDCsare in the earliest stages.

Noble thinks that the entire Israeli gas marketcan average 800 million to 1 Bcf a day by thetime Tamar is on line. Power generation willcontinue to burn the bulk of the gas, while theindustrial market has the capability of reachingbetween 200- and 400 million a day.

“When we started with Mari-B wehad 25 miles of pipeline from theplatform to the shore,” says Bruce

Erickson, Israel-based business developmentmanager. “Now the infrastructure is almost allover the country, and we have 6 to 7 Tcf of gas.There’s no supply question, and Israel is veryhungry for natural gas and the environmental,economic and efficiency benefits it brings.”

Certainly, Tamar supplies the reason to putinfrastructure across the whole country, andthat investment will generate more demand.“Long-term, we certainly see the option of de-veloping LDCs and residential and transporta-tion demand. We are very supportive of allthese efforts,” says Erickson.

Along this journey, Israel has had to quicklyform an environmental and regulatory systemfor handling natural gas. The country has incor-porated both European and U.S. standards forparts of its infrastructure. “We’ve worked to-gether since day one,” says Cook. “As wemove forward with Tamar we think we cancontinue that relationship.”

The company has a sense of urgency to getTamar on line, to avoid any disruptions in thegas supply to IEC, and to keep gas demandgrowing.

Noble has produced roughly 50% of Mari-B’s gas, and plans to add compression in thenear future to maintain volumes. There is alsosome talk of converting Mari-B to a gas-storagefield in the future, a piece of infrastructure thatwould enhance Israel’s young gas industry.

In addition, Noa and Noa South, two minoraccumulations originally drilled around thesame time as Mari-B, may be developed as sup-plements to the Mari-B supplies before Tamarbegins to flow gas.

“Both Noa and Noa South are still there and

gas markets since it drilled the first Mari-Bwell, says Rodney Cook, senior vice president.

Right after the Mari-B discovery, Noblebegan to meet with Israel Electric Corp., thestate-owned utility that generates almost all ofIsrael’s power. Noble sold IEC on the benefitsof gas, and the utility began to convert some ofits boilers to dual fuel.

“We had to create the market, and fortunatelyfor us now the market is starting to grow,” saysCook. The first gas sales were in early 2004, toIEC’s 1,200-megawatt Eshkol power station atAshdod in southern Israel.

Noble initially brought its Mari-B gas on-shore at a temporary facility at the Eshkol facil-ity; now the Yam Tethys partnership has apermanent receiving terminal nearby with ca-pacity of 900 million a day.

IEC has converted existing boilers to dualfuel, added new gas turbines and put in com-bined-cycle facilities as well. Company-wide,IEC generates about 60% of its electricity withcoal. Prior to the availability of natural gas, itused heavy fuel oil in boilers and diesel in tur-bines. Now IEC has replaced heavy fuel oilwith gas in nearly all its plants. Certainly, forthe utility, gas is significantly more economi-cally attractive and environmentally friendlythan fuel oil.

Israel’s electric sector has been growingrapidly: during the past decade, demand forelectricity has jumped between 3% and 6% peryear. Even though 2009 is projected to be flat,due to the economic downturn, Israel is goingto need much more electricity.

As part of its plans to meet growing demand,IEC is installing three new gas turbines at vari-ous places around the country. Eshkol, Noble’sfirst customer for Yam Tethys gas, is the site ofone of those, scheduled to be on line in July2010, says Amnon Bibi, Eshkol plant superin-tendent. A combined-cycle power plant is alsoin the works for 2012-13. The main fuel forboth units will be natural gas.

Israel’s average natural gas use is around400- to 500 million a day, although demand canhit 750- to 800 million a day when the air-con-ditioning load hits hard in the summer months.Currently, the Yam Tethys partnership suppliesabout 65% of IEC’s demand and the pipelinedEgyptian gas accounts for the remainder. “TheMari-B platform averages sales of 300 to 400million a day,” says Doug Smith, Israel-basedgeneral manager of Noble Energy Mediter-ranean Ltd. The supply from Egypt runs 150- to220 million a day.

Noble has stressed its reliability as a gas sup-plier to IEC and all its customers. “Last year,we met demand 100% of the time; over the lifeof the project we’ve been more than 99% reli-able,” says Smith. Additionally, Noble has hadzero security incidents in its decade of workingin Israel.

Beyond electricityIsrael’s industrial market is developing as

Doug Smith, top,general managerof Noble EnergyMediterranean,says that thecompany has hadzero securityincidents in 10years ofoperations inIsrael. ColinLothian, bottom,lead analyst,Wood Mackenzie,says thecountry’s fiscalterms arecomparable tothose companiesenjoy in the U.S.Gulf of Mexico.Facing page, alone boat sailson theMediterranean inthe last light ofday.

Page 13: Israel   oil & gas investor magazine (november 2009)

available, waiting for the right time for us to de-velop them and bring them into the infrastruc-ture,” says Cook.

“For the state of Israel, we are providing arevenue stream, clean energy, and a secure sup-ply of gas for 15 to 20 years. It’s a unique posi-tion in the world.”

World stageTamar is a very positive story for both Noble

and Israel, says Colin Lothian, Edinburgh-based lead analyst for Wood Mackenzie’s Mid-dle East research team. “It’s a hugelysignificant gas find for both parties. For Noble,Tamar will be key in generating substantialvalue for it over the next couple of decades. ForIsrael, it delivers security of supply in a difficultenvironment.”

Much still needs to happen before any gasreaches the Israeli coastline and flows to con-sumers, he says. “Issues to iron out include gaspricing, and the final development concept andthe cost of that development.”

Israel’s fiscal regime is very attractive, saysLothian. The terms that were offered for the ex-ploration acreage were given at a time whenoffshore Israel was a frontier. “They were pur-posely attractive to encourage companies to ex-plore.” On a global benchmark basis, Israel’sterms are comparable to those in the U.S. Gulf

of Mexico. “Of course, terms may evolvethrough time. But as it stands at the moment, Is-rael is a great place to do business,” he says.

Negotiated gas prices paid by Israeli cus-tomers to Noble and its partners and toEMG, the Egyptian supplier, have also

jumped dramatically this year. There’s been astep change. Previously, average gas-salesprices were about $3.10 per million Btu. InJune 2009, three contracts were signed thatraised prices to the high-$4 range, and up intothe mid-$5 range. “If Tamar can achieve gasprices in that neighborhood, it will be very at-tractive in value terms.”

The 2012 timeline appears optimistic forTamar gas, and yet may be achieved, says theanalyst. Noble has already secured a deepwaterdrilling unit for its development work, whichcould have been a chokepoint. Most pressingly,it needs to determine where the landfall will beand where it will tie into the existing infrastruc-ture. Onshore facilities will be needed to enablethe gas to move to consumers as well.

That said, there are remarkably few technicalissues for such a major discovery in a newbasin. Moreover, the economics of gas fromTamar stack up quite favorably compared toother energy-supply options for Israel.

“It’s a win-win for all involved,” says Loth-ian. “It’s hats off to Noble and its partners.” �

A plush hotel spasits on the edgeof the Dead Sea.Israel isexpanding itsnatural gastransmissionsystem to serveits interior.

Excerpted from

November 2009Copyright©Hart EnergyPublishing1616 S. Voss Rd.Suite 1000Houston, TX 77057(713) 993-9320