The partners in the Leviathan natural gas reservoir have signed another agreement with Jordan. The new agreement is worth $15 billion, much larger than the two previous deals signed. Tel Aviv Stock Exchange (TASE) trading in the shares of the partners - Ratio Oil Exploration (1992) LP (TASE:RATI.L), Avner Oil and Gas LP (TASE: AVNR.L), and Delek Drilling Limited Partnership (TASE: DEDR.L) - was halted ahead of the news.
Delek Drilling CEO Yossi Abu and Noble Energy senior VP J. Keith Elliot are currently in Jordan to sign a giant deal with the Jordanian Electric Power Company (JEPCO). The deal covers 15 years, during which 3 billion cubic meters (BCM) of gas will be sold to Jordan annually - a total of 45 BCM.
Jordan's total natural gas consumption is estimated at 4.5 BCM annually, and as of now, it must use diesel fuel and fuel oil as a substitute for gas. Jordan formerly imported 2.5 BCM from Egypt through the Arab Gas Pipeline (AGP). The shortage of gas in Egypt and the problems and sabotage in Sinai, however, eventually caused an almost total halt in the flow of gas to Jordan.
According to an Israeli cabinet decision dated June 23, 2013, up to 40% of the natural gas reserves discovered in Israel can be exported either by pipeline or as liquid natural gas (LNG). Of the 113 trillion cubic feet (TCF) consumed worldwide, only 11 TCF are consumed as LNG, because it is usually expensive, takes a great deal of time, and is more technically complex than gas through a pipeline.
This explains why the Tamar and Leviathan partners want to use a pipeline for exports; furthermore, a land-based pipeline is cheaper than an undersea pipeline. Gas can be exported by pipeline from the Tamar and Leviathan reservoirs to the Palestinian Authority (PA), Jordan, Egypt, Cyprus, and Turkey, of which the PA and Jordan are the most accessible. The PA's consumption capacity is limited, which makes the Jordanian market the most attractive.
Simultaneously with its negotiations with Israel, Jordan is also considering other options for importing natural gas. These include importing gas from Basra, Iraq to Aqaba Port in Jordan, LNG imports through Aqaba Port while using a floating storage regasification unit (FSRU) to reconvert LNG to gas, and additional gas exploration in Jordan (an option that has not produced many results to date, given that only 200,000 cubic meters, all consumed in 2013, have been found there so far).
Last February, the Tamar partners announced that an agreement had been signed to sell natural gas from the reservoir to Jordanian companies Arab Potash and Jordan Bromine, which operate on the Jordanian side of the Dead Sea. The gas was sold through a US company named NBL Eastern Mediterranean Marketing controlled by Noble Energy, which owns 36% of the Tamar reservoir, while Isramco owns 28.75%, Delek Drilling and Avner 15.625% each, and Dor Gas 4%. The agreement is for 15 years, with a total value of $500 million. Under this agreement, 1.8 BCM will be supplied to the Jordanian companies, and gas is slated to start flowing in 2016, when the pipeline to Jordan is completed.
Israel Natural Gas Lines (INGL) will be responsible for laying the pipeline, with financing from the Tamar partners. As of now, however, there are still problems with the pipeline route, which is expected to pass through nature reserves at the southern Dead Sea.
Published by Globes [online], Israel business news - www.globes-online.com - on September 3, 2014
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