UBS says it’s gung ho on Israeli gas

“In our estimation foreign investors will begin to express interest in investing in the Israeli gas sector,” UBS Israel analyst Roni Biron said.

April 5, 2011 23:54
1 minute read.
Tamar offshore gas field.

tamar offshore gas field_311. (photo credit: Courtesy)

International investors are still overlooking Israel’s exploration and production market, but that will soon change, global financial- services firm UBS said Tuesday in a report on the Israeli gas and oil sector.

The report was released as part of new research being conducted by UBS Israel analyst Roni Biron on Israel’s gas and oil sectors, as part of a wider survey of the European energy sector.

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“In our estimation foreign investors will begin to express interest in investing in the Israeli gas sector,” Biron said.

Discoveries made in the last two years at the Tamar and Leviathan offshore natural-gas fields had led to a significant decrease in risk levels, he said, adding that developments in the global gas market as well as geopolitical developments in the Middle East would help boost the domestic gas market and everything connected to the exportation of natural gas.

“On the one hand, the disruption of the gas supply from Egypt underscores the importance of strong indigenous supply, with potentially positive implications for Tamar’s market share and pricing,” the report said. “On the other hand, Israel compares favorably against Libya and other Middle Eastern and North African exporting regimes, which should help the Leviathan partnership to secure long-term contracts.”

“Despite the latest discoveries and vast potential, we believe the Israeli exploration and production market remains largely overlooked by international investors, with the surge in trade volumes dominated by local investors,” the report said. “On the other hand, we believe the growing interest from international E&P companies should enable local license holders to crystallize value by selling stakes.”

The report initiated coverage on Delek Energy, Delek Drilling, Avner Oil, Isramco and Ratio Oil, the first three of which constitute the E&P arm of Delek Group and hold stakes in all discoveries, while Ratio holds a stake only in Leviathan and Isramco only in Tamar.

“Based on the current oil probabilities in Leviathan, we prefer the Delek companies,” the report said. “But note that Ratio offers the highest possible upside value should extensive oil reserves be validated. We believe the potential for vast gas reserves to be discovered in the Levant Basin and exploration de-risking represents a hidden asset for all five companies.”

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