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Israel Expects Highest Ever Royalties From Energy Production in 2019



President Donald Trump on Sunday said that his administration would likely unveil its peace plan after Israel’s elections in September. Photo by Kobi Richter/TPS on 3 June, 2019

By: Arye Green

The Israeli Ministry of Energy on Monday announced it collected NIS 426 million in revenue from energy production royalties for the first half of 2019.

The revenue for the first six months of 2019 has slightly surpassed that of the same period last year. However, the ministry expects a spike in revenue towards the end of the year, leading to a record high total.

“We expect a significant rise in revenue from royalties in 2019, bringing the total to a record of more than a billion NIS. This is thanks to the production of natural gas from the Leviathan Gas Field towards the end of this year,” said Yuval Steinitz, Israel’s Minister of Energy.

The rise in revenue in the first half is surprising, given the circumstances. In April a technical malfunction stopped the production of natural gas at the Tamar drilling site, causing revenue to plummet. Also, the strengthening of Israeli currency undercut income, as they got less NIS for a given amount of natural gas sold in foreign markets.

The Leviathan project is nearing completion and will push Israel’s energy production to new highs.

The Leviathan partnership has finished building and testing the topsides of the rig in Texas, and it is now being shipped to Israel. After the platform is assembled and put in place, the drilling will commence and natural gas will be delivered to customers in Israel and abroad by the end of 2019. The platform consists of five separate parts, the first of which is now on its way. The parts have been in production for the past 26 months and are expected to arrive in Israel by September.

The Leviathan Reservoir is a partnership owned by Delek Drilling (45.33%), Noble Energy (39.67%) and Ratio Oil Exploration (15%) that was established in December 2010.

The project shows great promise for the national and regional energy markets and can serve as an economic growth driver for Israel and the region.

Leviathan is one of the world’s largest deep-water natural gas discoveries found in the first decade of the 21stcentury. An estimated 605 BCM, or 22 trillion cubic feet, of natural gas and close to 40 million barrels of condensate have been discovered.

The development of the project has been in contention every step of the way. Since the Reservoir’s discovery, Israel’s Sheshinski Commission to examine the state’s royalties from the gas has significantly raised taxes on the project. The commission imposed a windfall profits levy, which can reach 50% of the producer’s profits once the producer recoups a certain percentage of his exploration and development costs.

The project shows great promise for the national and regional energy markets and can serve as an economic growth driver for Israel and the region.

The Israeli government expects to earn a total of NIS 17 billion in royalties from the gas discovery. Additionally, the windfall profits are expected to reach up to 10 billion a year by 2040.


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