Chevron ships massive volumes to Egypt for processing fuel into liquified natural gas (LNG) and then exports it to European ports
The American energy giant Chevron is utilising a 200-foot-tall steel structure 6 miles off the coastline of Israel to process natural gas dug out from wells at the seabed. Leviathan, the Israeli gas field, has enormous gas reserves, way more than what Israel can consume or the pipeline infrastructure can handle.
Since the beginning of the Russia-Ukraine conflict, gas has been used as a weapon for arm-twisting Europe. Russia blocked gas supplies in retaliation to the economic sanctions imposed upon it by NATO members. This proved to be a nightmare for European citizens during the winters.
Chevron ships massive volumes to Egypt for processing fuel into liquified natural gas (LNG) and then exports it to European ports. It has rolled out plans for expanding the production facility and developing an enhanced pipeline network to boost exports to the neighbouring countries. As per the expectations of the plan, exports might more than double, to such an extent that it can fulfil the demands of smaller nations like the Netherlands, a major consumer of fuel that relied on Russian supplies.
Leviathan is a giant which generated $2.5 billion in revenues the previous year. But, it was never optimally utilised to its full potential because of its tense location. Business relations between countries have recently been formed in this area that suffered due to wars. Hence, matters of increasing gas production and selling it into global markets had been a challenging task.
Chevron has increased interest in this area and has developed commercial relations with neighbouring countries that also have a similar interest in this region. Chevron has obtained rights to gas deposits in Israel, Egypt, and Cyprus and is working towards a kind of trilateral collaboration to develop the region as one of the world’s last major petroleum hubs.
History
The California-based energy giant Chevron started pumping natural gas in Israel after acquiring a smaller American energy company, Noble Energy, for $4.1 billion three years ago. It holds a 40% operating stake in Levithan and 25% in Tamar, another Israeli gas field. It also has stakes in nearby areas like an unconstructed gas deposit in Cypriot waters and a chain of offshore blocks in Egyptian waters.
Currently, Chevron is supplying most of the Israeli gas through pipelines to Egypt and Jordan. The further expansion plans will produce more gas which will be exported ahead, but the mode of transport has yet to be announced.
Abdel Fattah el-Sisi, the Egyptian President, has plans to develop his country into a gas trading hub. Egypt will require huge volumes of gas to flow through its network of two LNG facilities located on the Mediterranean coast. The two facilities are partly owned by Shell and an Italian company, Eni.
Chevron has plans to transport Israeli gas and, hopefully, Cypriot gases, too, from Egyptian terminals. They are also planning to install an LNG facility in Israeli waters. This will reduce Egyptian dependence and provide full autonomy to export gas at the global price. Jeff Ewing, Chevron’s managing director for the Eastern Mediterranean, said that this plan would give control to Chevron to decide where LNG will go after processing.
Possibilities ahead
Chevron’s multibillion-dollar investment to expand its capacity in Israel is still doubtful. But, whatever happens, the certainty of the Eastern Mediterranean region transforming into an energy trading centre has risen.
A couple of decades ago, Israel had no significant discovery of petroleum reserves, despite being located in the Middle East region. Now it has become an essential player in the global gas supply chain, and gas made has a lot of contribution to the Israeli economy, helping them move away from coal for electricity generation.
Leviathan, besides gas, is contributing to the development of bilateral relations. Recently, an investment company based out of Abu Dhabi, Mubadala, has bought a stake in the Tamar gas field. An Emirati national oil company, Adnoc with BP, is in talks to purchase a 50% stake in a partner of Leviathan, NewMed Energy.
Another interesting reconciliation of relations happened between Israel and Lebanon based on gas production. This deal will allow the exploration of petroleum reserves in Lebanese waters by overseas companies. This deal was initiated by Washington.
The European Union made a deal with Israel and Egypt to import greater quantities of natural gas from their gas fields. On the other hand, they are heavily investing in cleaner energy sources, like solar and wind. Europe’s gas consumption decreased by 14% last year and is expected to fall further.