Noble Energy Inc. (NBL - Free Report) signed a non-binding Letter of Intent (LOI) involving its Leviathan field partners and BG International for the delivery of natural gas to BG’s existing gas liquefaction complexes in Egypt from the Leviathan prospect, offshore Israel.
As per the LOI, Noble Energy and its partners will supply 3.75 trillion cubic feet natural gas over for a period of 15 years. The natural gas supply will be channeled from the Leviathan floating, production, storage, and offloading vessel to the liquefied natural gas (LNG) facilities via sub sea pipeline.
The agreement is anticipated to be finalized after negotiations and will be subject to regulatory consent from Israel and Egypt. Noble Energy is the major interest owner with 39.66% in the Leviathan field while Delek Drilling and Avner Oil Exploration each hold a 22.67% interest. Ratio Oil Exploration Limited Partnership also carries a minor interest of 15%.
This is a positive move on part of Noble Energy’s development efforts at the Leviathan field. The prospect’s vast gas reserve potential has successfully attracted the attention of customers in Middle East. The phase 1 of the project is being crafted to meet the increasing gas demand in Israel and regional markets. The latest agreement will likely pave the way for Noble Energy to successfully penetrate the Gulf regions.
Noble Energy’s international assets play a crucial role in the company's overall development of which the Eastern Mediterranean prospect will prove to be a key growth catalyst. In addition to Leviathan, the Tamar play has also proven to be a critical revenue driver. The company in early 2014 booked in gas sales deal with multiple customers in Jordan from its Tamar play.
The economic and population boom in the Middle East countries will result in soaring power demand. Though oil forms the prime resource, the Gulf markets believe exporting oil is a more lucrative choice given the healthy oil prices at international level rather than using it in their low-efficiency thermal plants.
This has gradually shifted the region’s focus to natural gas. This factor is perhaps prompting the Gulf markets to carve long-term gas supply deals with major U.S. exploration entities like Noble Energy.
Meanwhile, Noble Energy to seize on the growing Middle East energy opportunities has been working to expand its capacity in the Eastern Mediterranean. It wrapped up almost 50% of work at the Ashdod compression project and together with the Tamar Southwest project, the company’s capacity installation at Tamar will amplify by 2016.
Earlier, the company and its partners in Tamar signed a LOI for a long-term gas delivery to Egypt’s Union Fenosa Gas SA.
Currently, Noble Energy carries a Zacks Rank #3 (Hold). Other better-ranked oil and gas stocks include Zacks Ranked #1 (Strong Buy) Encana Corp. (ECA - Free Report) , Rex Energy Corp. (REXX - Free Report) and RSP Permian, Inc. (RSPP - Free Report) .