Israel's Leviathan in talks to sell gas to BG's Egypt LNG plant (updated)

Turcas Holding

29/06/2014 10:29

(Adds details, background, BG comments, share reaction) 
    By Steven Scheer 
    JERUSALEM, June 29 (Reuters) - The partners in Israel's 
giant Leviathan natural gas field said they had signed a 
preliminary agreement with British oil and gas company BG Group 
 BG.L  to negotiate a deal to export gas to BG's liquefied 
natural gas (LNG) plant in Idku, Egypt. 
    In the deal under discussion, Leviathan - off Israel's 
Mediterranean coast - would supply 7 billion cubic metres (bcm) 
annually for 15 years via an underwater pipeline, the partners 
said in a statement on Sunday.     
    An energy source in Tel Aviv said such a deal would be worth 
about $30 billion - providing a windfall to Israel's coffers 
from royalties. The source said the pipeline would be built by 
BG and a final agreement was expected by the end of 2014. 
    Such a a deal would be among the largest in Israel's 
fledgling energy sector and would help the partners develop 
Leviathan - which holds an estimated 19 trillion cubic feet of 
gas (530 bcm) and is expected to go online in 2017. Much of the 
reserves are earmarked for export. 
    BG said the Leviathan talks were one of several options it 
was considering to increase the supply of gas to its Egyptian 
plant. "While this non-binding letter of intent with the 
Leviathan partners is a first step, it is very early days," said 
a spokesman.       
    The talks with BG - which exports to more than 20 countries 
- come after Woodside Petroleum  WPL.AX , Australia's top gas 
producer, last month ditched plans to take a stake worth up to 
$2.7 billion in Leviathan.  ID:nL3N0O6524  
    Texas-based Noble Energy  NBL.N  is the field's operator 
with a 39.66 percent stake. Avner Oil  AVNRp.TA  and Delek 
Drilling  DEDRp.TA , subsidiaries of Delek Group  DLEKG.TA , 
hold a combined 45.34 percent, and Ratio Oil  RATIp.TA  has the 
remaining 15 percent. 
    Shares of Avner were 1.8 percent higher, while Delek 
Drilling's shares were up 1.1 percent and Ratio's shares gained 
3.5 percent in midday trading in Tel Aviv. 
    Delek and Avner last month raised $2 billion in an 
international bond offering to help fund Leviathan's 
development.  ID:nL6N0NX035  
    The gas unit of Turkish fuel retailer Turcas  TRCAS.IS  is 
holding non-binding talks with another company to jointly 
procure natural gas from Leviathan, while Leviathan's partners 
have also started looking into selling gas through a pipeline to 
Cyprus. 
    BG's first-quarter exploration and production volumes fell 4 
percent, hit by output problems in Egypt where the company's LNG 
project failed to deliver any cargoes in the quarter. 
    Production in Egypt fell 35 percent compared with the fourth 
quarter as the reservoir feeding its plant is in decline and the 
local Egyptian market took more supply, for which BG receives 
lower payments.  ID:nL6N0NN13X  
    BG said Egypt's government has not honoured its agreements 
and is diverting more gas for the domestic market.    
 
 (Additional reporting by Tova Cohen; Editing by Andrew Heavens) 
 ((steven.scheer@thomsonreuters.com)(+972 2 632 2210)(Reuters 
Messaging: steven.scheer.thomsonreuters.com@reuters.net)) 
 
Keywords: ISRAEL NATGAS/BG GROUP