Final Tzemach report doubles gas exports

The Tzemach Committee's final report increases the natural gas exportable from Leviathan from 35% of the reservoir to 75%.

Changes in the Tzemach Committee's final report will increase the amount of natural gas exportable from Leviathan from 35% of the reservoir to 75%, on the condition that another discovery can meet Israel's domestic needs. The final report includes several changes from the interim report.

The final report increases the amount of gas for export to 500 billion cubic meters (BCM), and also increases the amount of gas to be reserved for domestic consumption to 450 BCM from 400 BCM. The higher amounts are possible, after the committee revised upwards Israel's gas reserves by 150 BCM. Ministry of Energy and Water Resources director general Shaul Tzemach said that the additional amount is the quantity of gas with a 90% probability of discovery.

The Tzemach Committee decided that, within five years from the report's approval, gas quantities for export and domestic consumption will be revised.

Additional changes in the final report include removing the restriction on gas exports from reservoirs, the restriction of 15% safety margin at a reservoir, and the ban on large gas field owners from transferring export rights to other reservoirs. These changes will have a direct impact on the Leviathan reservoir, owned by Noble Energy Inc. (NYSE: NBL), Delek Group Ltd. (TASE: DLEKG), and Ratio Oil Exploration (1992) LP (TASE:RATI.L).

The Tzemach Committee also softened, at least semantically, its recommendations on gas export facilities. The interim report banned outright the construction of such facilities on territory not controlled by Israel. The final report advises giving priority to export facilities on Israeli territory.

Tzemach's proposal for the government to build an offshore gas pipeline network to link fields to shore terminals caused considerable contention in the committee's discussions. Budget Director Gal Hershkowitz strongly opposed the proposal, saying that it would cost billions of dollars. The final report calls for "government involvement in the planning and construction of natural gas infrastructures". In other words, the government will build onshore terminals and plan the offshore network.

Tzemach said that, in an extreme case, the government will finance pipelines from small reservoirs to the shore, if in the absence of such support there is no economic justification for developing these reservoirs, and there is no better alternative for their development.

Tzemach said, "If we don’t tell a developer, 'If you explore and find gas, but can't export it,' they won't explore. There is no risk here for the government, because no one will export gas that hasn’t been discovered. The name of the game is certainty, not restrictions and barriers."

The Tzemach Committee decided to require all gas reservoir license owners to obtain an export license and permission from the Petroleum Supervisor for export sales agreements. This condition will not apply to reservoirs jointly owned by Israel and other countries referring to the Yishai license, owned by companies of Teddy Sagi, Beny Steinmetz, and Israel Opportunity Energy Resources LP (TASE: ISOP.L). The Yishai license straddles the border of Israel's and Cyprus's exclusive economic zones, and export regulations for such licenses will be decided in diplomatic agreements between the two countries.

Published by Globes [online], Israel business news - - on August 29, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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