"A number of foreign firms have been in a bidding war for the fourth stake in the Leviathan field, where an estimated 17 trillion cubic feet (TCF) of gas made it the world's largest offshore discovery of the past decade when it was found in 2010," "Reuters" reports, adding that the prospect's three partners would pick a fourth partner with the necessary know-how.
"A decision will be made by the end of the year," Ratio Oil Exploration (1992) LP (TASE:RATI.L) CEO Yigal Landau told "Reuters". Ratio owns 15% of Leviathan, Noble Energy Inc. (NYSE: NBL) owns 39.66%, and, Delek Group Ltd. (TASE: DLEKG) units Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L) each own 22.67%.
"More important is the knowledge and expertise the company brings, especially to the 'midstream'," added Landau, referring to the construction of an underwater pipeline and a liquefied natural gas (LNG) terminal. "Long term, that will pay off more than if some other candidate comes and says they are willing to value Leviathan at an additional billion dollars in the short term."
"Reuters" says, "Experts have valued Leviathan at between $5 and $7.5 billion at this stage." It adds that production at Leviathan is expected to begin for the domestic market in 2016 and around 2018 for export, and it quotes Landau as saying that Leviathan will be connected both to Israel and Cyprus.
"Reuters" says, "19 new wells are expected to be drilled in the next two years in Israeli waters at a cost of about $2 billion, and many of these will go on to seek oil in the layers beneath the gas deposits."
"Reuters" adds, "In a statement to the Tel Aviv Stock Exchange last month, the Leviathan partners said Australia's Woodside Petroleum Ltd. (ASX: WPL) had submitted a bid to purchase a stake of up to 30 percent. Israeli financial newspaper "Globes" listed Russia's Gazprom as another leading contender."
"Reuters" adds that Cyprus, with its own newly found gas, is likely to provide the liquefaction facilities Israel could use to reach export markets by ship. Some analysts say future possibilities also include a Red Sea terminal so it can target Asian markets. It also notes that since the countries involved in the exploration have such small domestic markets, foreign companies are unlikely to invest unless there is a certainty of selling the gas abroad.
"Reuters" adds, "While many Israelis want the country to have its own LNG terminal, it is not clear the region has enough gas for two." It quotes Baker Botts energy expert Steven Wardlaw as saying, "There is a strong argument that there will only be one. And Israel is a long way behind Cyprus in developing an LNG facility." He added, however, "There is a great logic in having an LNG facility on the Red Sea. Large tankers can't get through the Suez Canal, so from there they can reach Asia more easily."
"Reuters" says that floating LNG (FLNG) terminal, a technology still under development, is another option. It says that South Korea's Daewoo Shipbuilding & Marine Engineering Co. has agreed to build one for the Tamar gas field and that Gazprom has signed a letter of intent to buy the gas. It quotes Kathleen Eisbrenner of Levant LNG, who helped secure the deal for Gazprom and Daewoo with the Tamar partners as saying, "With pipelines becoming increasingly expensive and the geology and geopolitics of the region, FLNG is absolutely feasible. I hope they would be interested in working with us in Leviathan as well."
Published by Globes [online], Israel business news - www.globes-online.com - on November 18, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012