China's CNOOC in talks over Leviathan
Energy giant's executives scheduled to visit Israel this week to examine possibility of purchasing stake in area's largest gas field
Talks began six months ago during Delek Drilling chief Yossi Abu's visit to China, where he presented Delek Group's gas portfolio which includes Leviathan (22.67%), Yam Tethys (about 23%) and Tamar (15.625%).
The Chinese invited Abu for an additional round of talks about three weeks ago, which led to the reciprocal visit.
The developing costs of the Leviathan field, expected online by 2017, are estimated at $6 billion. If CNOOC comes onboard, a smaller portion of the costs will be shouldered by the other partners – Delek Energy (45.34%), Noble Energy (39.66%) and Ratio Oil Exploration.
The purchase scheme may either include the entire stock or the diluted stock of one of more of the current partners.
80 times Israel's annual gas consumption
Aside from the Leviathan partnership, CNOOC is expected to discuss the possibility of establishing a supply line from Israel and Cyprus to the Far East from Leviathan and other fields, such as Tamar and Block 12 in Cyprus.
The Chinese executives are scheduled to meet representatives from the Ministry of Foreign Affairs and the Prime Minister's Office due to the strategic importance of this type of commercial contract.
Ultimate recovery estimates for the Leviathan field are for some 453 billion cubic meters (BCM) of natural gas – 80 times Israel's annual consumption in 2010 (5.3 BCM).
As revealed by Calcalist, on July 2010 Delek held talks with several international companies which are interested in setting up offshore LNG terminals, 130-140 kilometers (81-87 miles) west of Haifa, from which gas will be shipped out to Europe and the Far East.
Chinese global shopping spree
CNOOC is a Chinese government company with several subsidiaries of which some specialize either in gas and oil purchases or in gas exploration. The company ended the first six months of 2011 with $19 billion in earnings and a $6 billion bottom line.
The company is listed on Wall Street and Hong Kong exchanges and has a $90 million market cap on Wall Street.
In 2010, CNOOC accounted for 4% of the world's LNG gas purchases. During the recent year the corporation has been focusing on the acquisition of foreign energy companies. One of its most prominent deals was the acquisition of Argentina's leading oil exporter, the Bridas corporation.
Energy sector officials explain that the Chinese government has made a strategic decision to establish 15 natural gas terminals due to high demand in the republic.
Estimates are that the government is aiming to purchase at least 100 BCM of LNG over the next five years. As Leviathan is expected to be commercially operational until the end of 2016 or mid 2017, the timing of the purchase is optimal for both parties.
Delek Energy said in response, "We do not comment on the partnership's operating activities."
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