Sources inform ''Globes'' that although the Tamar gas field partners have signed a $380 million agreement to use Yam Tethys's natural gas facilities, in order to bring forward the start of gas deliveries to April 2013, they oppose the construction of a second land terminal from the reservoir at Ashkelon for the second stage of Tamar's development. Instead of the original plan, they propose to boost the output of the sole pipeline planned by adding compressors. This proposal will cost $300 million less than the cost of the original plan.
The Ministry of Energy and Water Resources' Natural Gas Authority is displeased by the proposal, as it has been demanding for two years that the Tamar partners - Noble Energy Inc. (NYSE: NBL), Delek Group Ltd. (TASE: DLEKG), Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), and Alon Natural Gas Exploration Ltd. (TASE: ALGS) - should begin construction of a second pipeline.
Stage 2 of Tamar's development is a critical project for the economy because the pipeline under construction for stage 1 cannot fully supply demand for natural gas. A 150-kilometer double 16-inch pipeline has already been laid on the seafloor from the Tamar platform, located 90 kilometers west of Haifa, to a site 22 kilometers west of Ashdod, where a new production platform will be located next year. This platform is under construction in the US at a cost of $1 billion.
From this new platform, gas will flow to Ashdod via a single 30-inch pipeline, which can carry an effective quantity of 7-8 billion cubic meters of gas a year.
Stage 1 of Tamar's development was approved before the disruptions in gas deliveries from Egypt. It is now clear that the pipeline cannot carry enough gas to fully meet the Israeli economy's natural gas demand in 2013. In December 2011, "Globes" revealed that Natural Gas Authority director Shuki Stern officially demanded that Noble Energy should immediately begin construction of a second pipeline from the production platform to an onshore terminal at Ashkelon. The demand came after the start of disruptions of gas deliveries from Egypt in January 2011, and the Natural Gas Authority demand to the Tamar partners to bring forward stage 2 of the reserve's development.
Implemention of Tamar's stage 2 does not require complicated statutory permits, because construction of the terminal at Ashkelon was already approved as part of the hook up of Yam Tethys's Mari B well. The estimated cost of building a second pipeline and terminal at Ashkelon is $400-500 million. The Tamar partners say that they cannot currently finance this cost, and that they have not yet received most of the financing for Tamar's stage 1.
Instead, they propose to insert compressors in the pipeline under construction for stage 1, arguing that this will boost the pipeline's output by 25%. The estimated cost of this proposal is $100-200 million, and the partners say that this can be carried out under the tight timetable of the original plan. But the Ministry of Energy insists on construction of the second onshore terminal as back-up to the terminal which will carry all of Israel's natural gas.
The obtaining of the bulk of financing for Tamar's stage 1 is subject to approval of the $14 billion gas supply contract between the Tamar partners and Israel Electric Corporation (IEC) (TASE: ELEC.B22), which was signed early this year. The size of this contract still depends on approval by the Public Utilities Authority (Electricity) and the Antitrust Authority.
Noble Energy said in response, "Noble Energy understands the economy's need for increased delivery of natural gas, and is examining several options to enable increased supply from Tamar. Before we can commit to any alternative, and invest the substantial amounts needed, financing is necessary. We need fixed and stable regulatory laws to be able to correctly assess the options facing us from the technical, commercial, and timetable aspects."
The Ministry of Energy said in response, "The Natural Gas Authority at the ministry has not expressed a position on this matter, since it has not accepted the proposal for increasing the capacity at Ashdod made by the company. The ministry reiterates its stated position that in order to maintain the security of Israel's energy supply and the regular supply of natural gas to the economy, onshore terminals in addition to the current terminal are needed."
Published by Globes [online], Israel business news - www.globes-online.com - on April 18, 2012
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