Leviathan Gas Field Revenue Set to Break Records

Israel's Leviathan gas field is on track to achieve unprecedented quarterly revenues, with projections nearing $840 million for the third quarter. This surge is primarily fueled by elevated global energy prices and expanded gas export capacity to Egypt, according to market assessments. The state is anticipated to benefit significantly, with an estimated $200 million in tax revenues from this period alone.

The substantial revenue uplift for Leviathan is attributed to a confluence of factors. Robust international demand, coupled with the recent expansion of export infrastructure, particularly the upgraded EMG pipeline which added 2 BCM annually, has significantly boosted the field's output potential. This enhanced capacity allows for the export of approximately 3.5 BCM of gas per quarter, a critical volume for meeting international commitments.

Pricing for exported gas is intricately linked to Brent crude oil benchmarks. For the third quarter, the average price, derived from a three-month rolling average, is estimated to hold steady around $6.55 per MMBtu across exports to Egypt, Jordan, and Israel. When combined with the record export volumes and the inclusion of condensate sales, this pricing mechanism underpins the projected revenue peak for the Leviathan consortium, which includes New-Med Energy among its partners.

Beyond Leviathan, the Tamar gas field is also anticipating a strong performance. While historically more focused on the domestic market, approximately 40% of Tamar's production is exported, making it sensitive to international price fluctuations. Recent enhancements have increased Tamar's production capacity from 10 BCM to 16 BCM per year, positioning it to capitalize on favorable market conditions. Discussions are reportedly underway for Tamar's partners, including Isramco, to join a significant export deal with Egypt, potentially valued at $20 billion, with Mubadala also involved in related discussions.

The increased export activity is occurring against a backdrop of rising domestic energy demand, notably from a growing number of data centers. These facilities are drawn to Israel by competitive electricity prices, largely a consequence of affordable natural gas. However, this escalating domestic consumption, alongside export commitments, accelerates the depletion rate of existing reserves. Projections suggest that without substantial new discoveries or a dramatic shift to renewable energy, Israel may need to import natural gas by 2048 to meet its energy needs, likely at a considerably higher cost.

The state's fiscal gains extend beyond royalties. In addition to the direct 10% royalty on 'wellhead' revenues, corporate taxes of 23% are levied on the partners' profits. Leviathan is not yet subject to the 'superprofit tax' (Mas Shishinski), which is expected to commence around 2028 once full investment recovery and a significant profit margin are achieved. These future revenues are earmarked for the Israel Sovereign Wealth Fund. Meanwhile, Tamar has already begun remitting this superprofit tax.