There has been much talk in recent days about Benny Steinmetz's missed opportunity. His company, STX, formerly owned 5% of the rights to the Tamar prospect. However, a deeper analysis of yesterday's announcement of a natural gas discovery at the Tamar 1 well shows that the biggest loser is BG Group plc (NYSE: BRG; LSE: BG), which forewent its holding in the prospect in 2005 for nothing. BG's loss is Delek Group Ltd.'s (TASE: DLEKG) gain. Delek took over BG's stake in Tamar.
BG loses twice over. Not only did it forego its stake in Tamar for almost nothing, but the discovery of commercial quantities of natural gas at the prospect could further delay negotiations with Israel on the purchase of gas from the company's reserves offshore from Gaza. Only recently, the government instructed Israel Electric Corporation (IEC) (TASE: ELEC.B22) to renew talks with BG for the purchase of half of these reserves. The government will now probably defer the negotiations until the extent of the Tamar reserves are known.
Energy sources say that former BG Group Israel general manager John Field did not want to abandon the Tamar prospect, but was overruled by the company's top management.
The tragic figure in the Tamar saga is undoubtedly Dr. Yossi Langotzky, a former representative of Steinmetz, who promoted oil and gas exploration in the Tamar prospect for years. A few weeks ago, Steinmetz refused to increase his share in the prospect, and abandoned it after all last-minute attempts to find a replacement failed. Talks with Oil Refineries Ltd. (TASE:ORL), controlled by Israel Corporation (TASE: ILCO) and Israel Petrochemical Enterprises Ltd. (TASE:PTCH), among others, failed to reach a deal.
Another loser from the Tamar gas discovery is East Mediterranean Gas Company (EMG), whose owners include Joseph Maiman through Ampal-American Israel Corporation (Nasdaq: AMPL; TASE:AMPL) and his private company Merhav MNF Ltd. The Tamar gas could become an alternative to EMG's Egyptian gas in the coming years, and reduce Israel's dependence on Egyptian gas in the long term.
Published by Globes [online], Israel business news - www.globes-online.com - on January 19, 2009
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