Israel to Finalize Prequalification Bids for $400 Million LNG Import Terminal in September

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Researched by Industiral Info Resources (Sugar Land, Texas)--Bids for the prequalification stage of Israel's proposed liquefied natural gas (LNG) import terminal are expected to be processed in September this year. The final tender documents for the $400 million venture will be released in March 2010. The new terminal is a part of Israel's strategy to reduce dependency on gas imports from Egypt, mainly from the Tamar fields and East Mediterranean Gas Company (Cairo, Egypt).

Several local and foreign players are keen on participating in this venture. Delek Energy Systems Limited, a subsidiary of Delek Group Limited (TLV:DLEKG) (Netanya, Israel), and Isramco Limited (NASDAQ:ISRL) (Houston, Texas) are planning to jointly bid for the project. The Delek-Isramco joint venture is already working together on the Dalit and Tamar gas fields located off the shores of Hadera and Haifa. Delek and Isramco also plan to export gas from the Tamar fields. Gas exports, however, require extensive infrastructure facilities. Delek is reportedly considering converting its offshore Yam Tethys gas field, in the vicinity of Ashkelon, into an underground storage facility in order to aid gas exports. Gas supplies from the field are expected to be exhausted by 2012-13.

Although the proposed LNG terminal would be used only for imports, Delek's gas export and storage strategy is expected to affect the prospects of the new terminal.

In view of these conflicting interests, Israel's Ministry of Finance and Ministry of National Infrastructures have yet to decide whether the Delek-Isramco joint venture qualifies to bid for the LNG import terminal project.

The scope of the tender includes construction of an LNG import terminal, in addition to managing the operations of the facility for a period of 20 to 30 years, after which the facility can be transferred to the government. The franchisee is also entitled to fixed royalties arising from the distribution of the natural gas. However, subsequent to the discovery of gas at the Tamar and Dalit fields, the government has excluded domestic gas distribution from the tender, thereby limiting the scope of the tender to construction activities alone.

International energy majors such as Mitsubishi Corporation (TYO:8058) (Tokyo, Japan), Eni SpA (BIT:ENI) (Rome, Italy), and Golar LNG Limited (OSL:GOL) (Hamilton, Bermuda) are also vying for project. However, energy suppliers Gaz de France SA (EPA:GSZ) (Paris, France), BP plc (NYSE:BP) (London, United Kingdom), and Gazprom (MCX:GAZP) (Moscow Russia), are not expected to participate in the tender as their key focus would be on selling natural gas to the region.

Eilat Ashkelon Pipeline Company (EAPC) (Ashkelon, Israel), a joint venture of the governments of Iran and Israel, is another contender in the fray. The company was created primarily to construct and operate a pipeline transporting fuel from the Port of Eilat to the storage facilities at Ashkelon.

However, according to the terms of the tender, state-owned companies are not allowed to participate in the bidding process. This clause automatically rules out Israel Electric Corporation (Haifa, Israel) from the project. Whether EAPC will be allowed to bid for this tender remains to be seen. The Ministries of Infrastructure and Finance had earlier foiled EAPC's attempt to acquire the Pi Glilot fuel farm.

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