Reuters: Deals: Israeli field partners seek gas sale to Gazprom

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Israeli field partners seek gas sale to Gazprom Mar 22nd 2012, 12:19 By Tova Cohen TEL AVIV | Thu Mar 22, 2012 8:19am EDT TEL AVIV (Reuters) - The partners in a huge offshore-Israeli gas field development will begin talks about selling 2 million to 3 million tonnes a year of liquefied natural gas to a subsidiary of Russia's Gazprom (GAZP.MM) for 15 to 20 years starting in 2017. The partners in the Tamar field said on Thursday they had signed a letter of intent to begin non-exclusive and non-binding talks with Gazprom Marketing & Trading Switzerland, a subsidiary of Gazprom Marketing & Trading Ltd. The price will be based on LNG prices in Asia or another agreed-upon price mechanism. Access to Mediterranean LNG would greatly enhance Gazprom's market position. The vast untapped gas deposits offshore Israel may give Gazprom the chance to expand its own LNG business in the fast-growing Asian market, especially after talks with China on pipeline gas supply have stalled. The Russian gas export monopoly so far relies largely on sales to Europe of gas pumped through its vast pipeline network, but it is a relatively small player in the growing Asian market for LNG. Up to 60 million tonnes of new annual capacity to produce LNG is under consideration in Russia, but for now just one plant is operating - the Gazprom-led, Sakhalin-2 LNG project which produces about 10 million tonnes per year. Gazprom faces stiff competition in the global LNG market from Qatar, the world's largest producer, as well as Australia, which may overtake the Middle East country as the top producer by 2020. PRODUCTION FROM 2016 HOPED In November last year South Korea's Daewoo Shipbuilding & Marine Engineering Co (042660.KS) agreed with field partners Noble Energy (NBL.N), Israel's Delek Group DELKG.TA and Isramco Negev (ISRAp.TA) to develop Tamar via floating production, storage and offloading (FPSO) vessels. Daewoo had said it aimed to produce LNG from the field, the world's largest offshore find in 2009 with reserves estimated at 9.1 trillion cubic feet of gas, starting at the end of 2016 if all the processes for the final deal remained on track. Clal Finance analyst Yaron Zer said the negotiations with Gazprom were a positive development for Tamar. "Finding a buyer for the gas will increase Daewoo's motivation to establish a (floating LNG) terminal," Zer said, adding that a finalised deal with Daewoo would add $1 billion a year in sales for Tamar starting in 2017. Work on Tamar will be split, he said, with the Tamar partners producing the gas, Daewoo liquefying it and Gazprom marketing the LNG. The Tamar partners said any exports of LNG would not affect planned supply from the field to the Israeli market, which is expected to begin next year. Last week Texas-based Noble said the Tamar partners signed a 15-year gas sales agreement with state-owned utility Israel Electric Corp ISECO.UL. Noble estimated total revenue of up to $23 billion for the 15-year period agreement. Delek and Noble are also partners in the Leviathan gas field, which is nearly twice as big as Tamar and is expected to be online in 2017. The Tel Aviv oil and gas index was up 0.8 percent in afternoon trading. (Additional reporting by Henning Gloystein and Oleg Vukmanovic in London; Editing by Jane Baird) Link this Share this Digg this Email Reprints

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