Price fall boosts LNG as Tamar alternative (Globes (Israel))

“The importance of liquefied natural gas (LNG) is a good alternative for states without gas, and it can be a solution in the meantime – even if it isn’t ideal – for the Leviathan field, which is being delayed,” claimed a senior official in the energy sector in response to a tender released on Thursday by the Israel Electric Corporation (IEC) (TASE: ELEC.B22) for a shipment of LNG.

He added, “However, it cannot serve as a long-term solution, since the price can go up as easily as it has just gone down.” The IEC published the tender after the national grid broke its demand record twice in last week’s heat wave, with the gas from the Tamar field not enough to supply all the needs of the market.

The demand to promote the import of LNG was first heard during the gas shortage of 2011-2012, after Egypt cut off its supply and the Yam Tethys reservoir’s production declined. An offshore terminal was set up one kilometer west of Hadera and a ship was contracted to provide power; when the Tamar field does not provide sufficient power, the ship can simply turn on in minutes to make up the missing capacity.

While the LNG port is a sort of insurance policy, many have claimed the idea was not financially sound. While IEC pays the Tamar operator $5.5 per thermal unit, it paid $18 per unit for LNG last year. However, the drop in oil prices caused LNG prices to lower by 50%, with prices averaging around $7.5 per thermal unit.

In an even more surprising twist, the price of LNG intended for export from the Middle East to Europe currently stands at $5.49 per unit – meaning the price of import is nearly equal to the price of gas from Tamar.

“Though LNG prices have dropped by dozens of percentage points, it still does not come near the gas from Tamar,” claimed Amir Foster, a consultant in the energy sector. “Even if Israel buys the gas for $5.5, there are other expenses stacked on. Furthermore, for LNG to actually satisfy the needs of the market, Israel would need to build several more terminals and connect with more ships; the costs are steep.”

Published by Globes [online], Israel business news – www.globes-online.com – on August 10, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015