National Gas Pipelines Company and Eilat-Ashkelon Pipeline Company (EAPC's) want to build a $6 billion liquefied natural gas (LNG) facility in Eilat. According to the preliminary proposal they submitted to Minister of Finance Yuval Steinitz, the facility will be located in EAPC's oil terminal at the port.
The choice of Eilat is intended to exploit the port's proximity to target markets for natural gas exports in Asia. Once the LNG facility is up and running in 2018, the two government companies plan to sell part of the facility to private parties, including natural gas suppliers and customers.
The proposed plant will have a capacity to supply five billion tons (7 billion cubic meters) of natural gas a year. National Gas Pipelines says that this quantity guarantees that, by 2030, Israel will have sufficient natural gas reserves for domestic needs for 30 years. The company calculates the cost of liquefying the gas at $3.20 per million British Thermal Unit, and that the price of LNG ranges from $8 per million British Thermal Unit in Asia to $12 in the Far East. This would give the companies a 10% return on investment in the project.
National Gas Pipelines submitted the proposal as part of a position paper sent to the inter-ministerial committee on the natural gas market, headed by Ministry of Energy and Water director general Shaul Tzemach. The committee is due to decide whether to allow natural gas exports next month, and if so, under what terms.
A document written by French investment bank CFL recommends building an LNG facility as a national project. "An LNG facility will allow the liquefication of gas for transport by tankers to export markets is a cornerstone for the development of Israel's natural gas market," said CFL Israeli representative Yarom Ariav, a former director general of the Ministry of Finance.
National Gas Pipelines stresses the importance of public ownership of the LNG facility, and warns against a facility under the control of Yitzhak Tshuva-controlled Delek Group Ltd. (TASE: DLEKG) and its partners in the Tamar and Leviathan natural gas fields. Once the facility is operational, National Gas Pipelines believes that it will be possible to halve government ownership in it, while keeping a golden share.
The discovery of the Leviathan field, which has 16 trillion cubic feet (470 billion cubic meters) of gas greatly boosted the idea of building an LNG facility. The Cypriot government is a major backer of the idea, and is planning to build a facility on the island, together with Delek, to facilitate gas exports from Israeli and Cypriot discoveries, such as Leviathan and Block 12.
The Israeli government has reservations about building a facility outside the country, due to strategic and economic reasons. Minister of Energy and Water Uzi Landau supports building a facility in Israel.
National Gas Pipelines said, "The issue was presented in depth to the natural gas policy committee last week."
Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2012
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