Senior executives from Gazprom (Nasdaq: OZGPY; LSE: OGZD; DAX: GAZ; RTS: GAZP) have been in Israel over the past few days to examine possible cooperation over the large offshore gas fields discovered off Israel's coast. Representatives of the Russian energy giant have met with top executives from Delek Group Ltd. (TASE: DLEKG) unit Delek Energy Systems Ltd. (TASE: DEOL) controlled by Yitzhak Tshuva to consider options for the Leviathan field, which could include buying the natural gas or a partnership in the prospect.
Gazprom's aims are still unclear. The major concern in Israel's gas exploration sector is that the Russian energy company wants to block possible gas exports to Europe. Even if Israel's Leviathan is a relatively minor player in the European gas market compared with the Russian giant, the prices agreed upon and types of contracts signed by Israeli companies could create unwelcome precedents from Gazprom's point of view.
Gazprom is the world's largest natural gas producer. Other big energy companies like Exxon Mobil Corp. (NYSE: XOM) and Royal Dutch Shell (LSE: RDSA; RDSB) are reluctant to become involved in the Israeli market for fears of a backlash from the Arab world, but Gazprom is not bothered about potential boycott threats. The company has a monopoly in Russia's gas industry and is sitting on the world's largest natural gas reserves.
As the main natural gas supplier to the EU, Gazprom has no difficulties in marketing gas and building the necessary infrastructures for natural gas transportation which could cost up to $6 billion. That said, Gazprom's entry into the Israeli market would have far reaching political and strategic significance because Gazprom is not only an energy giant but also a company controlled by the Russian government. Russian president Dmitry Medvedev headed Gazprom before becoming the head of state.
Published by Globes, Israel business news - www.globes-online.com - on February 29, 2012
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