UPDATE 2-Russia's Gazprom in talks to buy LNG for Asia from Israel's Tamar

Tue Feb 26, 2013 8:42am EST

Related Topics

* Tamar floating LNG to produce 3 million tonnes per year from 2017

* Australia's Woodside had bought into key offshore gas field

* Deal may boost Gazprom's case for monopoly on LNG exports

By Melissa Akin and Tova Cohen

MOSCOW/TEL AVIV, Feb 26 (Reuters) - Russian energy group Gazprom said it is in exclusive talks to buy liquefied natural gas from the Tamar field off Israel's coast, which could strengthen its hand in the booming Asian LNG market.

Russian President Vladimir Putin last week reiterated his call for increased efforts in LNG to diversify Russia's gas exports, which are focused on the weak European market.

A deal to buy liquefied natural gas from Israel would enable Gazprom, the world's biggest conventional gas producer, to export directly to high-priced markets in Japan, South Korea, China and India, currently inaccessible via pipeline.

The Tamar project under discussion would liquefy gas from Israel's Tamar and smaller Dalit fields at a floating liquefaction vessel at a rate of 3 million tonnes per year over 20 years, the companies involved said on Tuesday.

That equates to 84 billion cubic metres of gas over the 20-year period, roughly 30 percent of Tamar's estimated reserves of 274 bcm.

The project would aim to start LNG deliveries in 2017.

Tamar is one of two major recently found gas fields off Israel that are due to start production in the next few years, the other being the bigger Leviathan field.

Gazprom Marketing & Trading and Levant LNG Marketing Corp, the marketing agent for the Tamar project, signed an agreement for exclusive, non-binding talks, the companies said. The parties had signed a letter of intent in March to begin non-exclusive talks.

Gazprom faces stiff competition in the global LNG market from Qatar, the world's largest producer, as well as Australia, which could overtake Qatar as the top producer by 2020.

In 2011 Russia ranked as the world's eighth biggest LNG exporter, according to the International Gas Union.

DAEWOO TERMINAL

South Korea's Daewoo Shipbuilding & Marine Engineering Co. has agreed with field partners Noble Energy of Texas, Israel's Delek Group and Isramco Negev to develop Tamar via floating production, storage and offloading vessels.

Ella Fried, an analyst at Leumi Capital Markets, said there were still issues to be resolved before LNG exports could begin.

She noted that while the recommendations of a government-appointed committee allowed for LNG exports from Tamar, the Israeli government had yet to adopt these recommendations. Indeed, a government coalition has yet to be formed since an election was held in January.

"Also, floating LNG (FLNG) platforms are still in the development stage around the world," Fried said.

Delek subsidiary Delek Drilling said Levant and Gazprom would hold exclusive talks for six months with the aim of reaching a binding agreement. The price for the LNG would be linked to the price of Brent.

Gazprom Marketing & Trading will provide financial support to Levant to develop the FLNG project by way of an equity investment or financing. The amount would be significant but has yet to be agreed by the parties, Delek said.

Development of the Tamar and Leviathan fields will make Israel less dependent on energy imports but the country has said it will also allow a significant amount of its natural gas to be exported.

In a deal that appeared to challenge Gazprom's ambitions to boost its position in the global LNG trade, Australia's Woodside Petroleum announced late last year it would buy a 30 percent stake in even larger Israeli gas project, Leviathan. Gazprom had also bid for the Leviathan stake.

Russia has only one export plant for now, operated by Gazprom, Royal Dutch Shell and Mitsui at Sakhalin-2, which supplies India and South Korea and spot cargoes to Japan.

However, last week Gazprom said it had decided to build an LNG plant near Vladivostok in Russia's Far East with a view to supplying the Asia-Pacific region.

The company is also fighting to retain its monopoly on Russian gas exports in the face of calls from rivals for rights to export LNG, which is a grey area under Russian legislation. The Israeli contract may help boost its case.

The partners in Tamar, which contains an estimated 9.7 trillion cubic feet of gas (274 billion cubic metres), said any LNG exports would not affect planned supply from the field to the Israeli market, which is expected to begin in April.

Tamar has already signed a number of large deals, including one to supply as much as $23 billion of natural gas to state-owned utility Israel Electric Corp and $4 billion worth to units of conglomerate Israel Corp.

Delek and Noble are also partners in the Leviathan gas field, which has estimated gas reserves of 17 tcf and is expected to be online in 2016.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.