Tamar, UFG in renewed gas talks

The Tamar Partnership and the Spanish energy company Union Fenosa Gas (UFG) are holding talks on a possible pipeline gas supply deal. The two companies signed a memorandum of understanding over two years ago, but since then the Israeli energy market was stuck because of regulatory issues and the MOU progressed no further.

According to Bloomberg the two companies are negotiating expanding the annual capacity from 4.5bn m³ to 6bn m³ to fulfill a 15-year contract. The gas is expected to be transferred to UFG's liquefaction facility in Damietta, Egypt. In order to facilitate the deal, UFG will have to drop its arbitration claim against Egypt from 2013 when Egypt took the gas destined for export markets.

Tamar rig (credit: Tamar partnership)

Last year Israel's Israel Electric Corp. (ICE) won an arbitration claim against Egyptian national gas companies for cutting supply in 2012 and was awarded compensation of $1.8bn, which led Egypt to freeze all gas negotiations with Israel. A few months ago Israel agreed to waive half of the compensation and Egypt would pay the other half in 14 annual installments, though there is no formal approval of the deal. Yesterday during a conference call, Asi Bertfeld, Delek Group CEO, confirmed the renewed negotiations with UFG. 

As part of the deal with UFG Tamar Partnership will have to implement phase 2 of field development, including drilling and expansion of its offshore treatment rig capacity. A drilling rig, Atwood Advantage is expected to arrive at Tamar in November in order to drill another well which will improve energy security to the Israeli domestic market according to Tamar Partnership. 

In the past Tamar said that it would lay the pipeline up to the Israel-Egypt marine border line and from there the Spanish company will finance and take care of the infrastructure. The total investment in Tamar expansion is estimated at $1.5-$2bn which includes the 400-km undersea pipeline from Ashkelon to Damietta, which would be mostly within Egyptian waters.

Ya'acov Zalel