Friday, May 20, 2011
Knight Ridder/Tribune Business News
by Amiram Barkat, Globes, Tel Aviv, Israel
Sources inform "Globes" that Delek and Noble Energy are about to decide to develop the offshore Noa natural gas field near Yam Tethys and the Gaza Strip. Development of the field could ease the expected natural gas shortage if the gas flow from Egypt does not resume in full.
Until recently, Delek and Noble Energy said that there was no economic justification to spend $200 million to develop the two billion cubic meters Noa gas field. Development would take a year.
However, the prevailing high prices for natural gas have changed the picture. The price the two companies obtained in their gas supply contract with Hadera Paper -- $8.50 per million British Thermal Units, 50 percent above 2009 prices -- translates into $300 million per billion cubic meters.
Delek says prices are set according to the same formula used to set the price in the company's 2009 contract with Israel Electric Corporation (IEC), and it attributes the entire rise in the price in the Hadera Paper deal to the higher price of oil, to which natural gas prices are linked.
The financial report for the first quarter of Delek unit Delek Drilling indicates that the suspension in natural gas deliveries from Egypt did not greatly affect the company's revenue, partly because of the increased gas deliveries were sold at the same price as regular deliveries.
Delek and Nobel Energy reportedly supplied 100 million cubic meters of gas from Yam Tethys because of the suspension of Egyptian deliveries during the first quarter. Yam Tethys supplied 800 million cubic meters of gas during the first quarter.
The financial report also indicates that, despite the crisis in Egyptian gas deliveries, Israeli demand for natural gas slightly exceeded government projections. Demand reportedly increased because of increased use of natural gas by IEC, which for the first time preferred natural gas instead of coal for the generation of electricity, due to the sharp rise in the price of coal in recent months.
The price of coal has reached $120-130 per ton, comparable to $5.50 per million BTU for natural gas. When the excise on fuel and externalities are factored in the cost of coal equals the cost of natural gas, except that coal is more polluting and harmful to the health.
Copyright (c) 2011, Globes, Tel Aviv, Israel
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