Tuesday, March 27, 2012

Gazprom seeks Israeli gas for Asia, denying it to European markets....

Gazprom seeks Israeli gas for Asia, denying it to European markets....?
By Robert M Cutler

MONTREAL - Russia's Gazprom announced this week that its Swiss-based subsidiary Gazprom Marketing and Trading, created just last year, has signed a letter of intent with the consortium exploiting the Tamar offshore Israeli natural gas deposit to begin talks for marketing gas from Tamar and another offshore field, most probably Dalit.

Tamar is estimated to contain 265 billion cubic meters (bcm) of natural gas. Gazprom has also expressed an interest in the offshore Leviathan deposit. It is being developed by Israel's Delek Group, and is estimated to hold 700 bcm of gas in addition to 4.2 billion barrels of oil.

Gazprom would purchase the liquefied natural gas (LNG) from a company that the Israeli consortium would create, Russian business newspaper Vzglyad reported. Gazprom's interest is principally to keep Israeli natural gas out of the European markets, where Russia is the principal foreign supplier.

The Tamar consortium has already committed between 113 and 136 bcm to six Israeli entities, including a 15-year deal to supply 42 bcm to the Israel Electric Corporation, according to reports published this week in the Israeli press, This will replace the natural gas that Israel used to receive from Egypt before the latter abrogated the contract and cut off the flow several months ago. Egyptian gas used to represent slightly over one-third of the source for electricity generation in Israel; the remainder comes from coal imported from Russia.

Gazprom's discussions on Tamar are focusing on the quantity of 2-3 million tons of LNG per year as from 2017, Reuters reports. The amount is equivalent to 2.8-4.1 bcm per year (bcm/y) after re-gasification. According to Gazprom's own unconfirmed report, the price would be based on Asian market norms, which are lower than those in Europe.

However, as the letter of intent does not prevent Israel from opening negotiations with other potential partners, this particular aspect of the report may be seen merely as a statement of Gazprom's preferences: much as the statement at the end of last year by the chairman of Gazprom's board of directors (and Russia's first deputy prime minister) Viktor Zubkov, that Gazprom would assist in the geological explorations and form joint ventures with Israeli entities, appears to have been statement of his firm's wishes rather than of agreements reached.

The shipbuilding and marine engineering arm of the South Korean firm Daewoo is constructing an LNG storage unit and terminal according to a November 2011 contract signed with the partners in the Tamar consortium - Noble Energy, Isramco Negev 2 LP, Delek Group, Avner Oil and Gas, and Dor Alon Energy in Israel Ltd - French sources report. The contract is reported to be worth several billion dollars and to extend out for 15-20 years.

Daewoo will construct these facilities so as to receive specially constructed Daewoo tankers that will take the gas to South Korea, where prices are between double and triple the price in Israel, French sources reported at the weekend.

In order to avoid the lengthy and politically sensitive process of permit-granting for an onshore gasification facility, efforts are being made to develop technology allowing the tankers to anchor offshore and take on the gas directly while also liquefying it, a process that involves cooling it to a temperature of approximately -160 degrees Celsius (-260 degrees Fahrenheit).

It appears that all these negotiations and contract-signings are proceeding without reference to the recent Aphrodite strike in Block 12 of Cyprus's exclusive economic zone, where the consortium is led by the same US-based company Noble Energy that leads the Tamar and the Leviathan consortia.

According to the Argus news agency, which specializes in energy matters, quoting chief executive Mehmet Uysal of the Turkish state firm TPAO, his company has signed exploration licenses both onshore and offshore with the administration of the island's northern third, the Turkish Republic of Northern Cyprus, which is recognized only by Ankara.

Of the eight exploration blocks concerned, Uysal says that some of them overlap with areas over which Nicosia asserts formal authority. Probably these are offshore from the port of Famagusta. Uysal said TPAO has no plans to drill there but may try exploration wells, although this decision would be taken by the Turkish government and not by TPAO; but TPAO would begin drilling its first onshore exploration well in the north this month.

Meanwhile, the Turkish newspaper Zaman, considered close to the ruling Justice and Development Party, quotes Turkey's Energy Minister Taner Yildiz as asserting that gas from Cyprus cannot transit Turkey because, rather incongruously, Israel has failed to apologize for the Mavi Marmara incident in 2009.

That concerns the so-called "Gaza Flotilla" incident in which nine passengers on the ship launched from a Turkish port died when, according to the United Nation's "Palmer Report" on the matter (named for former New Zealand prime minister Geoffrey Palmer, who headed the four-person panel), it sought "recklessly" to breach Israel's naval blockade of Gaza. According to the Palmer Commission, that blockade was a "legitimate security measure" to prevent weapons smuggling and was implemented in accordance with the requirements of international law.

Dr Robert M Cutler (
http://www.robertcutler.org), educated at the Massachusetts Institute of Technology and The University of Michigan, has researched and taught at universities in the United States, Canada, France, Switzerland, and Russia.

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