The Tamar gas field partners are planning $15 billion in natural gas sales to Turkey, Greece, and Cyprus without the need to build a pipeline. Sources inform ''Globes'' that the partners - Noble Energy Inc. (NYSE: NBL), Delek Group Ltd. (TASE: DLEKG), Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), and Alon Natural Gas Exploration Ltd. (TASE: ALGS) - are in talks with Edeltech Ltd. owner Uri Edelsberg, who wants to buy Tamar gas to supply it to customers in the Eastern Mediterranean Basin.
The talks have mentioned buying all the gas that may be exported from Tamar - 50 billion cubic meters (BCM) - plus another 30 BCM from the Tamar SW field, which will be developed as part of the main Tamar field. The amount of gas could increase in future if Isramco and Alon Gas's petition to increase exports from Tamar is accepted. Tamar has 100 BCM that has not been sold to Israeli customers.
Delek and its partners in Tamar originally planned to sell gas from the field to Gazprom via a floating liquefied natural gas (LNG) facility (FLNG), but the project, known as King, was frozen when the government's gas exports decision rendered the project uneconomical.
The negotiations with Edelsberg, which began a few months ago, picked up speed in the past few days, when an engineering feasibility study found an innovative technological solution - compressed natural gas (CNG). Natural gas demand in the Eastern Mediterranean is strong, especially in the Greek islands which are not connected to pipelines and must operate power stations with diesel. As a consequence, Cyprus has the highest electricity rates in Europe, and recently published a ten-year natural gas purchase tender. Although the tender targets LNG suppliers, Israel is the only country able to supply CNG, which costs much less than LNG.
Edeltech owns independent power stations, including Ramat Hanegev Energy Ltd., Ashdod Energy Ltd, and a stake in Dorad Energy Ltd. It plans to bid in the Cypriot tender and wants to buy gas from Tamar at $7 per million British Thermal Units. The cost of transporting gas from Israel to Cyprus is estimated at $2.50 per million British Thermal Units, giving a final price of around $10 per million British Thermal Units, compared with the current price of $18 per million British Thermal Units for LNG.
CNG technology is also suitable for transportation to longer distances, to Turkey, Crete, and mainland Greece, all of which are interested in Israeli gas. The gas would be sent from the Tamar production platform to an onshore CNG facility, and delivered by a CNG tanker to the customer. CNG systems are being offered by Canada's Sea NG Management Corporation, which can meet delivery within three years form the order. CNG has several advantages over a pipeline: there is no need for the huge investment in construction; no need for permission from hostile or war-wracked countries for a pipeline to pass through their exclusive economic zones; and greater operational flexibility without the dependence on long-term contracts with a limited number of customers.
Published by Globes [online], Israel business news - www.globes-online.com - on February 11, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014