[Freemanlist2] Noble Energy, Delek Group representatives in Egypt for export talks Map of Leviathan gas field

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Mon Feb 2 09:29:25 CST 2015

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Cyprus ends tender bid to import gas from Israel's Leviathan
	* Foreign investors may be deterred from investing in I...
	* Taking the mask off Leviathan gas negotiations
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Noble Energy, Delek Group representatives in Egypt for export talks
Map of Leviathan gas field. (photo credit:REUTERS)
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As Cyprus nixed a tender bid to import gas from the Leviathan reservoir, the island country may stand to benefit from Israel's ongoing indecisiveness over the large basin's future. 

The Cypriot Natural Gas Public Company (DEFA) has elected not to extend a proposal regarding the future purchase of natural gas from Israel's Leviathan reservoir, the basin's shareholders reported to the Tel Aviv Stock Exchange on Sunday. At the same time, representatives of Noble Energy and the Delek Group – the main partners in both Israel's Leviathan and Tamar reservoirs, as well as Cyprus's Aphrodite reservoirs – are in Egypt for talks regarding gas export agreements, industry sources confirmed to The Jerusalem Post on Sunday. 

"At this time, to the best knowledge of the partners, the Cypriot government is examining various options to supply natural gas to the domestic market in Cyprus, in addition to this tender, including the option of supplying natural gas from the Aphrodite reservoir in Block 12 of
 Cyprus," the TASE report said.

The Leviathan partners first bid on Cyprus's natural gas import tender in April 2014, for the supply of 0.7-0.95 b.cu.m. of gas annually through a pipeline from Leviathan. The bidders and the Cypriot government stipulated, however, that a binding agreement would need to occur by August 21, 2014, and was subject to financial closings on the Leviathan project and on the pipeline connection, as well as the receipt of regulatory and tax approvals, according to information from the Delek Group. 

At the 621-billion cubic meter Leviathan reservoir, about 130 km. west of Haifa, Houston-based Noble Energy owns a 39.66% stake, while Delek Group subsidiaries Delek Drilling and Avner Oil Exploration each hold 22.67% of the reservoir. Ratio Oil Exploration, meanwhile, has a 15% share. 

Noble Energy
 holds 70% of Cyprus’s 100-b.cu.m. Aphrodite reservoir, while the Delek Group owns 30%. 

Originally, the partners had planned to develop the reservoirs simultaneously, with Leviathan initially expected to be online already by the end of 2017 or early 2018.  Because the Cypriot domestic market only demands about 1 b.cu.m. of natural gas per year, developing the Aphrodite reservoir for the local market would not have been feasible, yet the reservoir is too small to develop alone for export purposes. 

Despite the minimal demands of the domestic Cypriot market, the country does urgently need a cheap gas supply, and had been depending on receiving gas from Leviathan by the end of 2017, industry sources told the Post. 

However, after Antitrust Authority Commissioner David Gilo
 announced in December that he would be reconsidering the status of the Delek Group and Noble Energy in the Leviathan basin – and perhaps reevaluate their exemption from “restraint of trade,” or cartel status – the development of the Leviathan reservoir was frozen. 

As it would now be impossible for Cyprus to receive gas from Leviathan within their necessary timeframe, the country decided not to extend the tender, the industry sources said. 

Representatives of the Delek Group and Noble Energy are now in Egypt primarily for two reasons  – to meet with representatives of British Gas as well as the Dolphinus Group.

In June, the Leviathan partners signed a letter of intent with the British Gas Group for the 15-year supply of 105 b.cu.m. of natural gas to its empty liquefaction plant in Idku. Worth
 approximately $30b. in total, such an agreement could generate more than $20b. in income for the state, sources told the Post at the time of the signing.

The Egyptian liquefaction plant at Idku is a two-train liquefied natural gas (LNG) production site, owned 35.5% by the British Gas Group, 35.5% by the Malaysian firm Petronas, 12% by Egyptian Gas Holding Company, 12% by Egyptian General Petroleum Corporation and 5% by Gaz de France.

Liquefaction plants in Egypt have experienced difficulties in carrying out activities as a result of the fact that the Egyptian government has needed to divert gas to the domestic market. As a result, liquefaction plant owners have been seeking other resource options for their facilities.

As a result of the current uncertainty regarding Leviathan’s fate, and
 due to the fact that the Delek Group and Noble Energy are also the main shareholders in the Aphrodite reservoir, the partners are providing the British Gas consortium with a Plan B should Leviathan exports not occur on schedule, industry sources told the Post. 

The plan stipulates that “if Leviathan will not be developed on schedule, Aphrodite will supply them with the gas they need,” the source said. Such an agreement would also enable the commercial development of Aphrodite, due to the external customer in addition to the small Cypriot domestic market.

Regarding the second meeting in Egypt, with Dolphinus, the parties are convening to discuss another letter of intent, signed several months ago. In October, the partners of the 282-b.cu.m. Tamar reservoir – of which the Delek Group and Noble Energy are also the largest
 shareholders – signed a letter of intent to sell 2.5 b.cu.m. annually to the Egyptian firm Dolphinus Holding Limited. At the time, the partners said that the gas could begin serving private industrial consumers already in 2015. 

The move would revitalize Egypt’s East Mediterranean Gas Company pipeline that for several years carried gas from Egypt to Israel, by reversing flow of gas through the pipe from Israel to Egypt. In 2008, EMG began supplying Israel with about 40 percent of its natural gas provisions, until saboteurs began thwarting the flow through Sinai pipeline explosions. Following 14 months of such attacks, the Egyptian government formally terminated the agreement between EMG and Israel in April 2012.

“You don't need to put in any infrastructure, just reverse the flow,” industry sources told thePost. “Then the Egyptian market can be provided with gas on a very tight schedule.”

Adding that the Egyptian government has already given the green light for this arrangement, the sources said they expected to see a full-fledged agreement pan out in the coming months. 
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