The cost of developing the Tamar and Dalit natural gas reserves will be $1.5-3 billion, according to a prospectus published by Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) for a rights issue in Tel Aviv. This is the first time that one of the partners in the prospects has disclosed their potential development costs.
Industry sources had estimated the development costs at $1.5-2 billion, and Isramco's estimate is at the upper end of the estimates. The company stated that the amounts mentioned are imprecise, but only a rough estimate because it is still waiting for Noble Energy Inc., which owns 36% of the two prospects, to complete the development plan.
Isramco, controlled by president Jackon Maimon, plans to raise NIS 90 million in a rights issue to finance its share of the wells.
The development cost of the Tamar and Dalit gas reserves will probably be based on the production rate that the partners, including Isramco and Yitzhak Tshuva-controlled Delek Group Ltd. (TASE: DLEKG), will set. Preliminary estimates in the energy market believe that the partners will want to produce 3-4 billion cubic meters of gas a year from the Tamar prospect, which is the current product rate at the Mary B well by Yam Tethys, owned by Delek and Noble Energy, offshore from Ashkelon.
This production rate will enable the Tamar partners to renew Yam Tethys' contract with Israel Electric Corporation (IEC) (TASE: ELEC.B22) for the delivery of 2-3 billion cubic meters of natural gas a year. It will also be enough to deliver gas to private power producers and companies.
Energy market sources believe that the large structure of the Tamar reserve will require 10-15 production wells. A well currently costs $100-150 million to drill. It will also be necessary to invest in a gas transportation network to carry the product to consumers.
Published by Globes [online], Israel business news - www.globes-online.com - on June 4, 2009
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