Sources inform "Globes" that US businessman Larry Mizel is in advanced talks to buy Israel's Karish and Tanin gas fields. Both fields are currently owned by Delek Group Ltd. (TASE: DLEKG) controllerd by Yitzhak Tshuva. The final version of the gas outline agreement, authorized by the cabinet in May, stated that these fields will be sold to a third party within 14 months.
The Karish and Tanin fields total 60-80 billion cubic meters (BCM) of gas and so far more than NIS 700 million has been invested in them. The fields were owned by Delek and Noble Energy until Delek acquired Noble's 47% share of the fields in November 2015 in order to follow the schedule for field sale set out in the outline agreement. The stake wassold for $67 million.
So far, the leading candidate for acquisition of the field has been the Italian company Edison. Other potential buyers mentioned in the past were Greece's Energean, the operators in the Sarah and Mira licenses, as well as the businessman Beny Steinmetz. US companies HESS and EOG also expressed interest during a meeting with Minister of Energy Yuval Steinitz in October 2015.
It now seems that Jewish businessman Larry Mizel joins the competition with his company Coleridge and is conducting advanced and intensive acquisition negotiations with an international energy firm. Estimates are that the acquisition will be completed in the next month.
Mizel began showing interest in the Israeli gas market in 2010 and currently holds 12% of the Oz license and 73% of the Arie license (both of which were part of the Benjamin permit). Mizel has also bid to buy Israel's Channel 10.
Not enough demand
Gas from the Karish and Tanin fields is not for export but only for domestic needs and Israel currently does not have enough demand to justify their development. The Tamar field currently supplies 99% of gas demand (the remainder is covered by shipments of liquefied natural gas, LNG, imported by the Israel Electric Company) and is expected to meet most of the demand in the next decade.
Moreover, pipeline costs from Karish and Tanin will reach hundreds of millions of dollars. Unlike most countries, Israel still does not have a policy to support small gas field development, which might include tax benefits or lower royalties.
The government is aware of difficulties in developing the fields and talks of active intervention in finding clients. According to government sources, the fields should sell at least 1.5 BCM of natural gas annually in order to justify their development. One way of intervening would be to oblige the chosen entrepreneur of the Ammonia facility to buy gas from these fields. Another option would be concentrated government acquisition of gas.
"I don't see the big ones coming"
Delek did not officially respond on the sale of the fields, but Vice President Strategy of Avner Oil Yaniv Friedman said today, at the Second Energy and Economy Conference, that "the company is making progress with selling the fields" and that the buyer is expected to develop them soon and connect them to the local market.
"The train has left the station," said Dr. Michael Gardosh, Section Director for Geophysics at the Ministry of Energy, referring to the way in which Israel is trying to encourage the development of small gas fields such as Karish and Tanin. He claims that "we must support smaller fields and we are checking out many venues, but this is not a simple issue." He added that "support could be physical or a participation in infrastructure."
Published by Globes [online], Israel business news - www.globes-online.com - on July 4, 2016
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