"Israel and Aphrodite have two alternatives: either they cooperate on exporting gas to Egypt, or they compete against each other. If they decide to compete, Israel will have the upper hand," a senior source in the Cypriot natural gas sector told "Globes." "Development of Aphrodite, in contrast to the development of Leviathan, depends on the signing of a unitization agreement between the two countries. Israel can now delay the agreement for as long as it wants."
Noble Energy yesterday announced that it was entering into a partnership with British Gas, and selling it 50% of its rights in the Aphrodite gas reservoir - Bloc 12 in Cypriot waters. The deal is for $165 million. The Aphrodite reservoir, discovered in 2011, is estimated at 4 TCF. The sale of half of the rights to British Gas is slated for closure by the end of the year. After the deal, Noble Energy will continue to be the operator of Bloc 12, with 35% of the total rights in the reservoir. British Gas will own 35%, and Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, 30%.
The announcement of BG's entry into Cyprus was received with mixed feelings in the Israeli gas sector. On the one hand, it may indicate that the company has confidence in the regional gas sector. Furthermore, BG and Delek are becoming partners in the Aphrodite reservoir, which may promote the subsequent signing of a binding contract between BG-Shell Oil (BG and Shell Oil have signed a merger agreement), and Leviathan. On the other hand, BG paid a bottom price of $0.10 per energy unit, reflecting a low price for undeveloped reservoirs.
In any case, the gas companies asserted that the entry of BG is good news, indicating that the company was interested in buying Israeli and Cypriot gas for its gas liquefaction facility in Egypt.
"The news of BG's entry is excellent news for Cyprus. This is not a company like Total, which merely holds the Bloc; the company is entering an existing reservoir," a senior Cypriot source said, adding that for Israel, the most important thing was to quickly sign a contract with BG before Shell enters the picture. "At the moment, it appears that BG is interested in and committed to buying Israeli gas. As soon as Shell comes in, though, this cannot be guaranteed."
DNV-GL Oil and Gas country manager Ben Oudman believes that as soon as Shell enters the picture, "Things will appear different." He said that although the purchase of gas from Leviathan appears worthwhile for BG-Shell, geopolitics is likely to be trumps. "Shell has interests in Qatar, and as soon as Iran enters the picture, it will also have interests there," he says.
According to Oudman, one of the most interesting export options for Leviathan is Turkey. "Israeli gas reaching Turkey can go from there to Europe, which is eager for cheap gas. Beyond that, opening Israel's economic waters to additional exploration is certainly a step that will promote the entry of more international companies," he declares.
Is there a chance that Shell will also invest in Israel? Royal Dutch Shell business development manager Ewald Breunesse, who is visiting Israel to attend the 2015 Israel Energy and Business Conference, says, "There is extensive economic cooperation between Israel and the Netherlands, so why shouldn't there be in energy?" When asked about the significance of BG's partnership in Aphrodite and the significance of a BG-Leviathan deal, he declined to respond, but claimed, "At today's low oil prices, it will be very difficult to develop Leviathan within four years. The partners will have to wait until energy prices rise."
Published by Globes [online], Israel business news - www.globes-online.com - on November 24, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015