Activity continues full speed ahead in the Levant Basin in the eastern Mediterranean offshore Israel, where Noble Energy Inc. might be called operator-in-chief. Since the region first piqued its interest in 1998, Noble Energy (then known as Noble Affiliates) has been a driving force in exploration there, where it has drilled seven exploration prospects, including five discoveries tallying more than 26 trillion cubic feet (Tcf) of natural gas.

The company's Tamar natural gas discovery, where it operates and owns a 36% working interest, was the largest conventional deepwater gas discovery in the world in 2009, according to Susan Cunningham, senior vice president of exploration. That field, in the Matan license offshore Israel, is estimated to hold gross mean resources of 8.4 Tcf of gas, nearly pure methane.

Tamar alone is said to hold enough gas to supply Israel's needs for at least 20 years, depending on the consumption rate.

Susan Cunningham is senior vice president of exploration for Noble Energy Inc., which followed up its giant Tamar natural gas discovery offshore Israel with Leviathan, the largest deepwater gas discovery in the world in the past decade.

Success tends to build on success. In December 2010, Noble Energy scored an even bigger find dubbed Leviathan, the largest deepwater gas discovery in the world in the past decade. The company pegs Leviathan's gross mean resources at 16 Tcf, spread over an areal extent of 125 square miles. Because of its immense size, Leviathan reportedly will require at least two appraisal wells to further define the total gas resource.

The find sits below 5,400 feet of water, about 30 miles southwest of Tamar. Noble Energy's earlier Dalit discovery, with resources of 0.5 Tcf, lies southeast of Tamar.

Even before the recent flurry of press releases and news reports, the Levant Basin's hydrocarbon potential had captured the attention of the U.S. Geological Survey, which conducted a resource assessment it released in 2010. The agency estimated that the province holds 1.7 billion barrels of oil and 122 Tcf of natural gas.

Once developed, the Leviathan and Tamar discoveries alone could turn Israel into a natural gas exporter, a true change in fortune for a country that has historically depended on fuel imports to meet its energy needs. This development could also alter the regional supply and demand picture; at press time, an Egyptian pipeline that sends natural gas to Israel was off­line due to an explosion in the Sinai Peninsula.

In recognition of the immense Leviathan discovery, Noble Energy has been selected to receive the 2010 Oil and Gas Investor Excellence Award for Best Discovery.

Tamar's new neighbor

Noble Energy operates Leviathan in the Rachel and Amit licenses offshore Israel, with a 39.66% working interest. Its longtime Israeli partners, Delek Drilling and Avner Oil Exploration, hold 22.67% interest each, and Ratio Oil Exploration has the remaining 15%.

"The Leviathan discovery has further confirmed our geologic models and interpretation of this basin and validates that it contains significant natural gas resources," says Charles Davidson, chairman and chief executive officer at Noble Energy.

When interviewed by the AAPG Explorer earlier this year, Cunningham offered a brief look at the region's geology.

"The Levant Basin is a deep, long-standing basin initiated at the time of Mesozoic rifting and infilled by post-rift Tertiary sedimentation," she said. "The Oligo-Miocene reservoir rocks at Tamar/Dalit/Leviathan are deep basin floor, turbidite fan sandstones sealed by shales of mid- to late-Miocene age and Messinian-age salt. The traps are structurally closed.

"The Oligo-Miocene clastics at Tamar occur at depths of almost 15,000 feet subsea. These reservoirs had not been penetrated by a drill bit until the Tamar discovery, where the Tamar well encountered more than 600 feet of net pay in three high-quality reservoirs."

Initial expectations target the commissioning of natural gas at Tamar by the end of 2012.

Now, additional expenditures and planning lie ahead for the world-class reservoir uncovered at Leviathan. Following its discovery, Noble Energy continued drilling deeper at the Leviathan-1 well, not necessarily expecting to find additional reservoirs, but to learn more about this large basin. The company announced on April 1, 2011, that it had suspended drilling operations at the location, citing wear on the wellbore casing, which will require added material and equipment to complete drilling. Meanwhile, the decision was made to move the Sedco Express rig to Tamar for development drilling.

Noble Energy also has a 47% working interest in the nearby 1-Tcf Mari-B Field, which it discovered in 2000. It is in 800 feet of water, 15 miles off the coast of southern Israel. This followed its successful test on the Noa prospect nearby, in 2,500 feet of water. Mari-B is the only offshore natural gas production facility in Israel. Production commenced in 2004, and Noble Energy recently completed two additional development wells there. These new wells, combined with additional compression work, will support near-term deliverability and serve as injection wells for storage in the future.

Discovery is the easy part

These exciting discoveries and others anticipated to come down the pike might be viewed by many as manna from heaven in this country known as the biblical land of milk and honey. But like most anything worth having, there are challenges to be overcome.

There had been little exploration in Israel before the emerging boom, meaning there's essentially no infrastructure, particularly offshore pipelines. Noble Energy has had a team evaluating export-market possibilities for more than a year, which include various pipeline and liquefied natural gas (LNG) options, according to president and chief operating officer David Stover. He has said that Leviathan alone could support a couple of mega-train plants to convert dry gas to liquid, to be shipped to designated ports.

Given the magnitude of an LNG solution, Noble Energy is likely to bring in partners to support this aspect of development, which would require significant capital investment. Another option is a deepwater pipeline, requiring coordination among multiple countries. Besides European and Asian markets, LNG customers could include Taiwan, South Korea and especially Japan, considering the aftermath of the nuclear debacle. All three of these entities have few in-country energy sources.

Noble Energy pegs Leviathan’s gross mean resources at 16 Tcf, spread over an areal extent of 125 square miles.

Challenges ahead

When you start talking resources of this magnitude, it comes as no surprise that Israel's neighbors are working diligently to lay claim to a part of the subsurface prize. Lebanon is said to be asserting that both Tamar and Leviathan extend into its territory. The Lebanese energy minister has stated that he will not allow Israel or any company representing Israeli interests to drill in Lebanese territory. As of now, an approved geographic/geologic demarcation has not been pinpointed.

Cyprus has also jumped into the ring. It's said to have signed maritime zoning agreements with Israel and Lebanon defining Cyprus' territorial waters. Turkey and Greece are in separate corners on this issue; Turkey controls an area in the north of the island where it has established the Turkish Republic of Northern Cyprus, recognized only by the Turkish government.

One of the biggest pitfalls in international E&P is that, often, the larger the targeted prize becomes, the more likely it is that the host country's powers-that-be will rewrite the original contract terms, upping its take.

In Israel, as elsewhere, the natural resources are owned by the state. The government can award oil and gas licenses to a company giving it the right to drill and produce the resources and, in turn, to pay royalties and taxes to the government. Israel has long had a relatively low royalty rate of 12.5%; royalties and taxes together tallied about 30%. But, the potential for vast profits from fields such as Tamar and Leviathan prompted a drastic change to boost the state's cut of the anticipated bounty.

At the end of March 2011, the Israeli legislature, the Knesset, passed legislation that could essentially double the rates the government will rake in from newly discovered offshore reserves. Royalties will remain the same as today, but a new and supposedly progressive tax could raise the combined fees to as much as 60%, in some instances. However, multiple incentives were put in place for projects such as Tamar that are coming online before 2014.

The bill sailed through Knesset by a vote of 78 to 2, much to the chagrin of the industry, where many companies have been subjected to an array of arbitrary contract changes after having spent many millions of dollars to explore and drill.

Even so, you just gotta go with what you've got, and Noble Energy has a full plate, even beyond the extensive development work ahead at Leviathan and Tamar. Cunningham notes that the company holds even more licenses in the Levant Basin. With the support of 3-D seismic data acquired in the region in 2009 and 2010, Noble Energy has identified a number of additional prospects and leads on its significant acreage position offshore Israel and Cyprus.

Cunningham says the company plans to drill a prospect in Cyprus during fourth-quarter 2010 or first-quarter 2012.

When announcing its 2011 capital program and guidance, Noble Energy said the eastern Mediterranean represents about $650 million. A large portion of this expenditure is targeted for Tamar development. Exploration plans in the region include three to four wells, which will include at least one appraisal well at Leviathan.

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