Israeli natural gas suppliers have the best chances of winning a $3 billion natural gas supply tender published by Cyprus. On Saturday, Cyprus's Natural Gas Public Company (DEFA) published an Invitation Document for proposals for the supply of natural gas for a period of up to 10 years, beginning on January 1, 2016. The gas is intended for use by the Vasilikos Power Station on the island's south coast. The tender is for the supply of 0.6-0.8 billion cubic meters (BCM) of natural gas a year.
Cypriots currently pay the highest electricity prices in Europe because all the island's electricity is generated by diesel. The switch to natural gas should save Cyprus $300 million a year. The country has not yet recovered from the debt crisis that forced it to seek EU aid.
The new tender follows the cancellation of a previous tender, which was won by Russia's Itera Group, in late 2013. Itera was due to supply liquefied natural gas (LNG) at $14.75 per million British Thermal Units via a floating storage and regasification unit (FSRU). Energy majors that specialize in LNG purchases, such as BP plc (LSE; NYSE: BP), the natural gas supplier to Israel Electric Corporation (IEC) (TASE: ELEC.B22), are expected to participate in the present tender.
The Cypriots hope to obtain a price of $10-11 per million BTU in the present tender. LNG prices are currently $17 or higher, whereas the price of Israeli natural is almost two-thirds lower. Israel is the only country with the means to deliver gas to Cyprus, either via pipeline or by compressed natural gas (CNG). Natural gas could be compressed at a facility built in Israel. The gas could come from the Tamar field, which currently produces surplus gas during night hours, from Leviathan in future, or from smaller fields that Noble Energy Inc. (NYSE: NBL) and Delek Group Ltd. (TASE: DLEKG) will sell.
The other Mediterranean country with natural gas reserves, Egypt, is struggling with a severe gas shortage, because of delays in the development of new fields.
To date, Israeli gas suppliers have signed one export deal, with the Palestinian Authority.
Published by Globes [online], Israel business news - www.globes-online.com - on January 26, 2014
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