articles | 23 April 2014

Delek natgas proposal could pave way for larger opportunities

A deicison by Israel's Delek energy group to bid for Cyprus' interim gas solution could serve as the first step for future export deals, the Jerusalem Post reported.

"The construction of a pipeline from Leviathan to Cyprus for small annual imports on the island might pave the way for larger opportunities," a report said this week.

"The Leviathan partners (Delek Group and Houston-based Noble Energy) may want to try to get a foot in the door," it added.

Supplying some gas from the Leviathan field to Cyprus could serve as the first step to having this added option of piping more gas from the Israeli plot there for a potential future export facility.

The bailed-out island's Natural Gas Public Company announced last week that four proposals had been received for the temporary supply of natural gas for power generation.

And that the government's goal is to have natural gas used in electricity generation in Cyprus - whose electricity is Europe's most expensive - by 2016. The tender requirements are for natural gas supply to be delivered at the station boundary at Vasilikos power station in Limassol.

In a Tel Aviv Stock Exchange (TASE) report, Delek and Noble Energy which are also exploiting Aphrodite field offshore Cyprus said they responded to DEFA's tender on Monday.

"The tender calls for the supply of between 0.7 and 0.95 billion cubic meters of natural gas annually to the Cypriot market through two delivery routes, one that will begin supplying the resource in early 2016," the report said. "And the other in no later than the second half of 2017. Initially concluding at the end of 2022, the tender includes a possibility of three one-year extensions through the end of 2025," it added.

The offer of the Leviathan partners is contingent upon, among other things, a binding agreement occurring between the bidders and the Cypriot government no later than August 21, 2014 the TASE report said.

Financial closure on the Leviathan reservoir's development and the pipeline construction, as well as receipt of necessary Cyprus government approvals, would also need to occur by this point, it added.

Noble Energy owns a 39.66% portion of the 535-billion cubic meter Leviathan field, while Delek Group subsidiaries Delek Drilling and Avner Oil Exploration each hold 22.67%.

The Jerusalem Post report contradicts a recent Reuters story that Israel had put previous plans to pump its gas reserves into a future export plant in Cyprus on the back burner. And that this dealt a major blow to the indebted island's ambitions to become a global player in the gas market.

An LNG export plant at Vasilikos is due to deliver at least 5 million tonnes a year to Europe and Asia, allowing Europe to reduce its growing dependency on Russia.

Source: InCyprus

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