In the past few weeks, the partners in the Leviathan gas field have received queries from some of Turkey's biggest companies and Western multinationals operating in the country interested in buying natural gas from the reservoir. Sources close to the Leviathan partners believe that there is a potential of 10 billion cubic meters (BCM) of gas sales a year to Turkey at $10-11 per million BTU. The price currently paid by Turkey for pipeline gas is $11-15 per million BTU. Energy market sources also say that gas deliveries to Turkey could begin by pipeline as early as 2016.
However, Israeli sources admit that uncertainties over Israeli-Turkish relations are a big question mark about such a project. "In principle, letters of intent could be signed tomorrow on gas sales to Turkey," an Israeli source told "Globes".
In addition to Leviathan's partners - Noble Energy Inc. (NYSE: NBL), Delek Group Ltd. (TASE: DLEKG) and Ratio Oil Exploration (1992) LP (TASE:RATI.L), the Prime Minister's Office, Ministry of Foreign Affairs, and the Ministry of Energy and Water Resources have been informed about the contacts. Signals from Turkey, first reported by "Globes", come from top government officials, although President Recep Tayyip Erdogan has been silent on the issue.
While the Turks are interested in buying Israeli gas, they refuse to buy Cypriot gas, but any pipeline from Israel to Turkey would run through Cyprus's exclusive economic zone. An Israeli-Turkish undersea pipeline would be 600 kilometers long and cost an estimated $2 billion. This would be the most worthwhile export channel for the Leviathan project, and the pipeline cost could be repaid within 2-3 years, assuming gross gas sales of 10 BCM a year for 7-8 years on a take or pay basis.
The Turkish market, which currently consumes 50 BCM of gas a year, is growing at 5-6% a year. Israel would not replace Russia as a source of gas imports by Turkey, so Israeli sources believe that Russia would not object to any Israeli gas deal.
Published by Globes [online], Israel business news - www.globes-online.com - on February 14, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013