The Petroleum Authority today announced a public hearing for access to the proposed liquefied natural gas (LNG) buoy by companies and Israel Electric Corporation (IEC) (TASE: ELEC.B22). The Petroleum Authority that large gas customers or groups of small customers independently import gas via LNG tankers, which will have rights to gasification service by the buoy, fully paid by the government. Alternatively, companies can link up with IEC, which is in talks with foreign LNG suppliers, in exchange for sharing in IEC's costs.
The LNG buoy is due to have a capacity of 2.2 billion cubic meters (BCM) of natural gas a year. The Petroleum Authority wants the first 0.5 BCM (the capacity of six LNG tankers) guaranteed for IEC, which would also have first rights to the next 0.85 BCM. The final 0.85 BCM would be open to all buyers on an equal basis. The Petroleum Authority is proposing the Belgian slots model, under which customers can order a time slot in advance to import LNG during the year. If demand exceeds supply, customers will receive their relative share of slots.
Spot prices for imported LNG are currently 2-3 times higher than the price of natural gas set in the natural gas supply contracts signed by the Tamar partners with IEC, Edeltech, Hadera Paper Ltd. (TASE: AIP; Pink Sheets: AIP), and other customers. Energy market sources therefore believe that the LNG import option will only suit large customers with no access to Israeli gas and which have to buy diesel or fuel oil, which cost five times more than natural gas.
The LNG floating buy is due to begin operations in late 2012. It will be located 10 kilometers offshore for the coal terminal at IEC's Orot Rabin Power Station in Hadera. Minister of Energy and Water Uzi Landau has made the project a national priority project, due to Israel's natural gas shortage caused by the repeated gas supply stoppages from Egypt and the depletion of Yam Tethys' Mari B well. Natural Gas Lines Ltd. is responsible for building the LNG buoy, while IEC is responsible for ordering the LNG tankers and buying the gas. Both are government owned companies.
Published by Globes [online], Israel business news - www.globes-online.com - on March 11, 2012
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