June 26, 2018 / 10:11 PM / a year ago

Israel hopeful about second offshore gas auction

WASHINGTON (Reuters) - Israel is confident a second auction to sell rights to develop offshore natural gas will be more successful than its first because some Arab countries have shown they are open to importing the fuel, the country’s energy minister said in an interview on Tuesday.

FILE PHOTO: Israel's Energy Minister Yuval Steinitz poses for a photograph during an interview with Reuters, in Jerusalem November 16, 2016. REUTERS/Ronen Zvulun/File Photo

Israel, which discovered it has large reserves of natural gas offshore in 2009, will hold a second auction in October or November, offering about 20 or 25 blocks in the Mediterranean.

The first auction, held last year, only got bids from two companies as some oil majors were concerned about a backlash from oil-rich Arab states hostile to the country.

But Egypt agreed early this year to buy $15 billion in Israeli gas and Yuval Steinitz, Israel’s energy minister, is confident that sale, and another one to Jordan, will help the auction get more attention this year.

Egypt and Jordan are the only two Arab countries that have treaties with Israel. Though powerful Sunni Gulf Countries like Saudi Arabia and the United Arab Emirates do not recognize Israel, the U.S. allies do have a shared concern over Iranian influence in the region.

“I think companies were skeptics about the exporting possibilities” of Israel, Steinitz told Reuters in an interview. “Things are different now.”

In March, the partners in Israel’s offshore natural gas field Leviathan, its largest, said that all conditions have been met to allow the supply of gas to Jordan’s power generating company. In 2016 Leviathan’s partners signed a 15-year, $10 billion deal to supply gas to Jordan, subject to conditions and approvals.

Steinitz met with five energy companies this week, in part to spark interest in the auction, including Exxon Mobil, France’s Total, and Australia’s Woodside Energy, on the sidelines of the World Gas Conference held in Washington.

Israel could offer incentives for companies interested in developing its offshore gas, Steinitz said.

Companies developing small to mid-size fields would face no export limits, he said. Companies developing larger fields would have some export limits but those would be “very minimal, almost insignificant,” he said.

In addition, some companies would not necessarily have to link up with the Israeli natural gas transmission system and would have the option to pipe gas to Cyprus or Egypt or build a floating liquefied natural gas (LNG) platform, he said.

Israel has many plans for its gas abundance. It hopes to sell more to Egypt where the fuel could be converted to LNG for export, and to build pipelines, one to Jordan, where gas could be sent to India and avoid the Suez Canal, and other to Europe.

Israel and Lebanon, meanwhile, have been struggling to overcome a dispute over exploration in the eastern Mediterranean. The U.S. government has been trying to help resolve the disagreement by participating in back-channel talks. Steinitz said there were new ideas on how to solve the issue, but did not reveal them. Israel would like to help bring an end to the problem, but it is more urgent for Lebanon because the gas would help its economy, he said.

Reporting by Timothy Gardner; Editing by James Dalgleish

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