Israel Prepares to Sell Billions Worth of Offshore Gas Fields

Tamar Field

Israel moved one step closer to selling stakes worth billions of dollars in its offshore natural gas fields after the Cabinet approved development plans that may lead to exports of the fuel for the first time.

Israel’s Delek Group Ltd. and Houston-based Noble Energy Inc. would have to reduce or sell stakes in the Tamar field in a bid to increase competition, according to Cabinet plans approved Sunday. In return, they could keep control of Leviathan, the world’s fourth-biggest offshore natural gas discovery in the past decade. Italy’s Edison said it’s interested in Israel’s smaller gas fields.

The plan, pending approval by parliament and the economy minister, would allow Israel to export as much as 1.5 billion cubic feet a day by 2025, said Thomas Driscoll, analyst at Barclays who rates Noble Energy “overweight.” That’s more than half of Norway’s average shipments to the U.K.

 “Israel was unprepared for the magnitude of the discoveries and it has revisited terms several times,” Driscoll said. “The partners need to know what the rules are before they will proceed with billions of dollars of investment.” The Cabinet plan “could be a watershed moment for the Israeli gas industry,” he said.

Rewriting Rules

Tamar was discovered in 2009 and Leviathan in 2010, and Israel has tried to rewrite gas development rules ever since. Leviathan contains about 22 trillion cubic feet of natural gas and Tamar has about 10 trillion. Tamar, the 10th biggest offshore gas discovery in the past decade, is worth an estimated $14.4 billion, according to Barclays. Leviathan is the fourth biggest discovery, the bank estimates.

Under the government plans, Noble Energy would have to trim its share in Tamar to 25 percent from 36 percent, and Delek would have to sell its 31.25 percent stake. Delek and Noble would also need to sell two smaller gas fields in the eastern Mediterranean, Karish and Tanin.

Sell Gas

The partners in the fields have taken steps to sell gas to companies in Egypt, Jordan and the Palestinian territories. Union Fenosa Gas of Spain signed a preliminary agreement in February to ship fuel from Tamar to its under-utilized gas liquefaction plant in Damietta, Egypt. The Egyptian government used to export gas by pipeline to Israel until 2012, when it suspended supplies due to repeated sabotage of the link in the northern Sinai region. The Union Fenosa deal has been on hold awaiting Israel to complete its gas export policy.

Edison Interested

Edison, part of Electricite de France, is not currently considering a participation in Tamar or Leviathan, an Edison spokeswoman said Thursday. The company is interested in investing in smaller gas fields such as Karish and Tanin if conditions to sustain such projects are put in place by the Israeli authorities.

Companies from China and India, which have strengthened trade ties with Israel, may also be interested in buying Israeli gas fields, said David Wurmser, director of Delphi Global Analysis Group in Rockville, Maryland, who consults for Israeli energy businesses.

Karish and Tanin, the smaller offshore fields, would be sold over a period of 14 months, according to the Cabinet plan. Any such sale may be complicated by a government requirement that gas from Karish and Tanin be sold locally and not exported.

“Israel has been pushing Karish and Tanin for some time and no one’s shown up,” Wurmser said. Israel should allow exports from both fields to make them more attractive, he said.

 

Source: Bloomber