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Israel Temporary Halt Drilling at Leviathan Field

Source: Reuters 5/29/2011, Location: Middle East

Israel's Infrastructure Ministry said it has instructed U.S.-firm Noble Energy not to resume drilling at the Leviathan natural gas field until it provides details about an earlier mishap, sending energy shares sharply lower.

Oil and gas producer Noble Energy had announced a few weeks ago it suspended the drilling of its second well at the offshore prospect in the eastern Mediterranean after it identified water flowing to the sea floor from the wellbore. "As required by the Infrastructure Ministry, Noble will submit in the coming days a detailed test report on the problem that will include a description of its findings and the steps the company is taking to prevent similar problems in the future," the ministry said in a statement.

The company is also required to present an "abandonment plan" of the faulty drilling site -- which was meant to further confirm the size of the gas reserves -- and after receiving permission, carry it out, the ministry said. Production at Leviathan is expected to begin around 2017, and it was unclear if this would affect the schedule, an official at the Infrastructure Ministry said.

Leviathan, 80 miles (130 km) off the Mediterranean port of Haifa, was the largest deepwater natural gas find in the past decade, the exploration group said.

Noble owns 39.66 percent of Leviathan, while Delek Energy's subsidiaries Avner Oil and Delek Drilling each own 22.67 percent. Ratio Oil owns the remaining 15 percent.

The partners in December confirmed earlier estimates that the site contained some 16 trillion cubic feet of gas at Leviathan.

Delek Energy shares dipped 2.9 percent, Delek Drilling slipped 2.8 percent, Avner declined 2.6 percent and Ratio slid 7 percent.

IBI Investment House analyst Guil Bashan said the mishap illustrates the risks and challenges of deep-sea exploration.

"The financial significance of the (halt) is negligible and, therefore, in our estimation (investors) should take advantage of the drops and buy," Bashan said in a note to clients.

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