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BP Wins Tender to Supply Israel with LNG

Source: Reuters 7/24/2012, Location: Middle East

BP said it will supply Israel Electric Corporation with liquefied natural gas (LNG) but declined to give details, while a source with knowledge of the deal said it will deliver two cargoes a month from December until May 2013.

Israel launched a tender to secure supplies after Egypt terminated a crucial 20-year gas supply deal in April this year.

BP beat off stiff competition from rival bidders including Russian gas giant Gazprom to secure the deal, critical to plugging a short-term gap in Israeli gas supplies.

Israel's electric utility -- without Egyptian gas and the country's sole working gas field nearly depleted -- is turning to LNG imports as a stop-gap until the first of its gas discoveries in offshore waters are brought to market from next year.

The source said that BP will deliver two cargoes per month over a period of six months starting on Dec. 1 to Israel's floating LNG import terminal, which is due to be completed in November.

Cargoes of the liquefied fuel will be turned back into gas on-board a floating storage and regasification unit (FSRU) owned by Excelerate Energy, and injected into sub-sea pipelines headed for Israel's gas grid.

State-owned Israel Natural Gas Lines expects construction of the terminal to finish in November after signing a $140 million construction deal last October with Italian firm Micoperi.

"BP will be supplying Israel with two cargoes per month from December," the source, whose company is involved in the deal, told Reuters.

Egypt in April terminated its agreement to supply gas to Israel because of what it said was a business dispute.

The 20-year deal, signed in the era of toppled President Hosni Mubarak, was unpopular with many Egyptians, with critics accusing Israel of not paying enough for the fuel.

Ties between the two countries have been strained since Mubarak, an advocate of the historic Israel-Egypt peace treaty of 1979, was toppled by a popular revolt last year.

Gas from Egypt once accounted for about 40 percent of Israel's supplies of natural gas, the country's primary energy source.

However, newly discovered reserves from huge offshore gas fields will secure Israel's energy needs for decades, even making it an exporter, but the first field, Tamar, will only come on line around April 2013.

The even larger Leviathan prospect is due to begin production around 2017.

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