Why did the Leviathan partners cancel the $6.7 billion deal?

The consortium determined that the commercial terms of the agreement, particularly the pricing structure, did not meet their internal investment thresholds compared to the potential returns from export markets.

What happens to the gas that was supposed to go to the power plants?

These volumes will likely be redirected toward international buyers, potentially increasing exports to Egypt for liquefaction or to Jordan via existing pipeline infrastructure.

How does this affect Israel's energy security?

While Israel has other sources like the Tamar and Karish fields, the cancellation of this deal may delay the commissioning of new gas-fired power plants and complicate the national transition away from coal-based generation.

Rigzone · September 30, 2026 (Sep 30) · 1 min read

Leviathan's Israeli Owners Cancel $6.7B Domestic Supply Deal

Leviathan Chevron Corporation

Analysis

AI-assisted analysis · reviewed by Yuri Kan

The termination of the $6.7 billion domestic supply agreement by the Leviathan consortium represents a strategic pivot toward higher-value export markets. By walking away from the deal with two planned Israeli power plants, Chevron and its partners are signaling a preference for international commercial flexibility over fixed domestic commitments. This move highlights the ongoing tension between corporate profitability and national energy security in the Eastern Mediterranean's evolving gas landscape.

Key Facts

The Leviathan consortium, led by Chevron (39.66%) alongside NewMed Energy (45.34%) and Ratio Energies (15%), has officially terminated a natural gas supply agreement valued at approximately $6.7 billion.
The deal was intended to supply gas to two new domestic power plants in Israel, which were expected to bolster the country's electricity generation capacity.
This cancellation follows a period of intense negotiation regarding pricing and supply guarantees that failed to meet the commercial thresholds of the field's owners.
Leviathan is the largest natural gas field in the Eastern Mediterranean, currently producing around 12 billion cubic meters (bcm) per year with plans for expansion to 21 bcm.
The termination of this domestic contract frees up significant volumes of gas that could potentially be redirected toward export markets in Egypt, Jordan, or via LNG.
The decision was formally disclosed in regulatory filings on September 30, 2026, marking a shift in the partners' long-term commercial strategy.

Background & Context

The Leviathan field, discovered in 2010, has been the cornerstone of Israel's energy independence and its emergence as a regional gas exporter since production began in 2019. The project was developed under the Gas Framework, a regulatory agreement designed to ensure domestic supply while encouraging international investment. Over the past few years, the partners have balanced domestic obligations with lucrative export contracts to Egypt and Jordan, which are vital for the project's Phase 1B expansion financing.

Market Impact

The cancellation of this $6.7 billion deal signals that the Leviathan partners are prioritizing higher-margin international sales over domestic utility contracts that may carry lower price caps or more rigid terms. This move could lead to a temporary supply-demand imbalance in Israel's domestic market as the country seeks to retire its remaining coal-fired units. For regional stakeholders, this decision likely increases the volume of gas available for export to Egypt's LNG plants, potentially benefiting European buyers looking for alternative supplies. It also highlights the commercial assertiveness of Chevron as it optimizes its Eastern Mediterranean portfolio.

What to Watch

The focus now shifts to the upcoming Final Investment Decision (FID) for the Leviathan Phase 1B expansion, which is expected to be finalized by early 2027. Investors will be looking for new export agreements with Egyptian or European entities to replace the cancelled domestic volumes. Additionally, the Israeli government's reaction to this cancellation will be a key indicator of the future regulatory environment for gas producers in the region.

Why This Matters for Cyprus

This development is directly relevant to Cyprus because Chevron and NewMed Energy are the lead partners in the Aphrodite gas field. Their decision to prioritize export flexibility at Leviathan suggests a similar commercial strategy may be applied to Aphrodite, potentially favoring an export-to-Egypt subsea pipeline over domestic or regional infrastructure options.

Frequently Asked Questions

Why did the Leviathan partners cancel the $6.7 billion deal?: The consortium determined that the commercial terms of the agreement, particularly the pricing structure, did not meet their internal investment thresholds compared to the potential returns from export markets.
What happens to the gas that was supposed to go to the power plants?: These volumes will likely be redirected toward international buyers, potentially increasing exports to Egypt for liquefaction or to Jordan via existing pipeline infrastructure.
How does this affect Israel's energy security?: While Israel has other sources like the Tamar and Karish fields, the cancellation of this deal may delay the commissioning of new gas-fired power plants and complicate the national transition away from coal-based generation.

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