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In February of 2023, Chevron announced the approved budget for the Leviathan Project, a reservoir development located six miles off the coast of Israel in “one of the world’s largest deep-water gas discoveries of 2000-2010”. In 2019, after 9 years of construction, the reservoir was completed producing 12 billion cu m/year of gas for sale in Egypt, Israel, and Jordan. The now approved Phase 1B is an expansion project with a $96.4 million dollar investment which includes the construction of a floating liquefied natural gas (LNG) plant, expanding production, and streamlining pipelines between Israel and its regional neighbors.
While this find will greatly benefit Israel and its neighboring countries, it also presents potentially lucrative opportunities for companies worldwide looking to capitalize on the region’s newly accessible energy resources.
This blog will explore 5 key reasons the East Mediterranean gas discovery has global implications.
By The New York Times
The Leviathan Gas Reservoir
In the wake of Russia’s war in Ukraine, Europe saw gas flows plummet increasing demand and prices. Chevron, after acquiring Noble Energy which discovered the Leviathan Reservoir, found itself in a favorable position to capitalize on the gas needs of European countries. With expansion, Chevron will be able to send its gas to Egyptian facilities converting gas into LNG which is then exported to European ports. The expansion of the Leviathan is expected to double exports to a level that meets the needs of a country like the Netherlands. In FY2022, the Leviathan produced a revenue of $2.5 billion and comes with hopes of aiding political and economic stability in a historically tense region.
5 Global Implications
1. Increasing energy exports
The massive gas reserve, estimated to contain 605 billion cubic meters (BCM), a natural gas production and distribution unit, could enable Israel & Egypt to ramp up natural gas exports to Europe and Asia. This creates openings for energy trading, transportation, and infrastructure companies to facilitate getting the gas to new markets.
2. Boost for service industries
With the new gas fields poised to come online, oilfield services companies, equipment providers, and engineering firms outside the region can vie for contracts to help build and maintain production facilities. The need for supplies opens up business opportunities for some companies in securing a functioning supply chain for the energy industry in the region. The expertise developed can be exported for future gas projects. Although details regarding contracts for this expansion are not yet known, Egypt already has two LNG facilities, part-owned by Shell and Italian energy company Eni, Mubadala, an Abu Dhabi investment firm has invested in operations, and the Emirates national oil company, Adnoc, is in negotiations to buy a 50% stake with BP in NewMed Energy, a 45% stake partner in the Leviathan.
3. Technology innovations
Extracting gas from deepwater, high-pressure deposits requires cutting-edge solutions. The challenging conditions create technology opportunities for R&D companies and innovators worldwide to develop advanced drilling, production, and processing equipment. For example, Shell and Energean, a London-based exploration and production (E&P) company, have teamed up in designing a carbon capture and storage (CCS) solution for the Idku LNG export terminal in Egypt. R&D partnerships like these have and will continue leading to great innovation such as horizontal drilling, the ability to steer the drill in different directions, which has created a highly competitive global horizontal drilling market. The investments in R&D create opportunities for some seeking to collaborate and develop cutting-edge technologies or bring new energy sector technology to the region.
4. Petrochemical manufacturing
With abundant gas as cheap feedstock, petrochemical companies may consider investing in new plastics, fertilizer or chemical plants in the Mediterranean coastal region. Construction, engineering and equipment firms can enable this manufacturing infrastructure. Türkiye, a regional neighbor to the Leviathan, is one of the largest petrochemical markets after China and India and is the 2nd largest global importer of petrochemicals. Türkiye is the 2nd largest producer of plastics in Europe, 10th in fertilizer consumption, and 7th in agricultural production, making it an attractive destination for petrochemical companies. Companies from outside the sector will gain direct access to petrochemical products that are needed for finished goods, leading to cost-effective and reliable supply chains.
5. Cleaner energy investments
The gas discovery reduces Israel’s reliance on coal and makes natural gas, a cleaner fossil fuel, and more cost-effective. This could aid the growth of renewable energy by allowing more flexible fossil fuel-renewables pairing and spur investments in green tech like solar, wind, and battery storage. In 2021, the U.S. Department of Energy and Israel’s Ministry of Energy gifted $5.48 million to 6 clean energy projects through Binational Industrial Research & Development (BIRD) grants, a program that partners U.S. and Israeli companies for industrial R&D. Investments within the clean energy sector lower energy costs, improves energy efficiency, establishes a positive brand, creates energy stability, and may provide access to potential government incentives and subsidies for companies like yours.
SUMMARY
The Mediterranean gas discovery has ripple effects far beyond the eastern Mediterranean. Companies worldwide can explore ways to enable gas extraction, supply equipment, and technology, facilitate exports, or capitalize on opportunities stemming from abundant and affordable natural gas. The discovery demonstrates how a single energy project can reshape global markets and open doors for companies to participate in the transitioning energy landscape. Is there an opportunity for your organization?
