"The internal rate of return (IRR) on the Tamar reservoir is 21.8%, putting it in the bottom third, compared with similar projects in the other OECD countries, and also in comparison with the other countries in the world," a report issued by international consultation company McKinsey states. Delek Drilling Limited Partnership (TASE: DEDR.L) presented this report at the hearing about the plan for the natural gas sector. The report was attached as an appendix to the official response sent by the company yesterday to the professional team conducting the public hearing on the gas plan.
McKinsey examined dozens of projects in which gas is being produced in deep water, defined in the report as "gas production projects at a depth of over 400 meters" (the Tamar reservoir is located at a depth of 1,700 meters, H.C.). McKinsey concluded, "There are very few current projects producing large quantities like Tamar… The IRR for such projects can reach 100%, and even higher."
McKinsey also examined the level of prices worldwide before and after the decline in oil prices. It said that gas prices in Israel were in the bottom third of gas price levels in OECD countries. "There are countries in which the price of gas is lower, but either the gas sector in those countries is very developed, and the development and production costs are consequently lower, or the countries are subsidizing the price of their gas," the report states.
Published by Globes [online], Israel business news - www.globes-online.com - on July 22, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015