Analyst: Jordan to buy Israeli gas as alternative to Egypt

Problems with Egyptian gas supply coupled with progress of Tamar offdhore project leads analyst to predict Jordan will buy 1 billion cubic meters of gas from Israel each year.

By NADAV SHEMER
June 10, 2011 05:18
2 minute read.
Tamar offshore gas field.

tamar offshore gas field_311. (photo credit: Courtesy)

 
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Clal Finance investment house predicts that Jordan will buy natural gas from Israel, as the Tamar offshore project looks likely to meet its timetable, while problems continue to surround the supply of gas from Egypt.

“In our estimation, the lack of faith in Egyptian gas will force Jordan to purchase at least 1 billion cubic meters of gas from Israel each year,” Clal Finance analyst Yaron Zar wrote in a report published Thursday. “Jordan consumes about 3 billion cubic meters of gas a year, of which a small amount is produced at home and the rest comes from Egypt.”

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Zar repeated his “outperform” recommendation for Tamar partner Isramco Ltd.

Tamar is located 90 kilometers west of Haifa and has an estimated 8.7 trillion cubic feet of natural gas. Analysts expect it to be able to provide for domestic Israeli consumption, before Leviathan, with an estimated 16 trillion cubic feet, turns Israel into a major natural-gas exporter in several years.

Zar warned that development was being held back a little by construction of the project’s second production rig in Texas. Worries over price controls on natural gas have been exaggerated, he said “The price of gas in our model for Tamar, at $5.50 per million British Thermal Units, and rising by one percent a year, is conservative,” Zar wrote in the report. “Price controls, if applied, will not be an effective restriction with regard to our model’s assumptions. The latest deals by Yam Tethys [drilling platform located offshore of Ashkelon and a main source of Israel’s current reserves] of over $8 are not representative of Tamar.”

The report came a day after Egyptian daily Al-Ahram reported an official from the Egypt Gas Holding Company as saying gas supplies to Israel and Jordan have resumed after the pipelines were fixed. Although the gas is flowing to Israel and Jordan, this does not imply that the export of gas will continue at the same discounted rates, the official said.

A meeting was set to take place Thursday with officials from the East Mediterranean Gas Company, which is responsible for supplying Egyptian natural gas to Israel, to tie the price of gas exports to international prices, he said.

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The Al-Ahram report said an Egypt delegation was in Jordan to discuss raising the price of gas exported to that country, so that it does not favor any particular country or company.

On Wednesday, Ampal-American Israel Corporation, a shareholder in the East Mediterranean Gas company, announced to the Tel Aviv Stock Exchange that EMG would try to renew gas flow to Israel, two months after a blast at one of its Sinai pipelines halted supply to Israel and Jordan.

Globes contributed to this report.

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