Israel Electric Corp. (IEC) has initiated a move to simplify LNG import procedures and lower the price, The Marker, a business daily reported. IEC is the only entity importing LNG, most of which it uses in its power plants, the remainder being sold on the market.
Israel has no onshore regasification facility. In 2011 Israel invested $150mn in an offshore buoy that can be connected to a floating storage and regasification unit (FSRU). However, each time the FSRU is emptied it has to leave Israeli waters and sail to Cyprus in order to be resupplied with LNG from an awaiting LNG cargo ship. That takes at least three days, during which period any major mishap in the natural gas systems has the potential to cause lengthy power outages.
This procedure is also wasteful since for most of the time the FSRU is idle. The same is true of the LNG ship anchored in Cypriot waters. Those two vessels are there only for emergency situation in the Israeli gas market.
However, now IEC is proposing that the FSRU would anchor right by the buoy and the LNG cargo ship would sail into Israel's territorial water and resupply the regasification unit there. In this scenario LNG supply to the pipe network would be continuous and more efficient.
Such an arrangement would also make the import of LNG into the Israeli market more stable and affordable and therefore will set a competition to the Tamar and Leviathan's main partners, Delek Group of Israel and the American company Noble Energy. Currently, Israeli customers are able to purchase LNG more cheaply than local production.
This current arrangement was needed because the Israeli gas authority was reluctant to allow unloading of gas on the Israeli shore and the technology of unloading off shore was still in its infancy. Now after three years in operation and positive experience IEC officials are confident that this technique, despite its limitations is safe enough. One of its more obvious limitation are the difficulties in operating the FSRU and the buoy during storms. However, storms are uncommon in the eastern Mediterranean.
Danger to shipping
The new proposal emerged in parallel to the idea of building a second buoy in order to increase energy security and also to serve the Israeli market since LNG prices are expected to stay low for long. Israel has begun negotiating with Excelerate Energy for the leasing of a second FSRU with an annual price tag of $65mn -$70mn. If Israeli officials will decide to convert the first buoy into an LNG regasification terminal then building another one might prove superfluous to the needs.
However, bringing LNG ships into Israeli territorial waters, in close proximity to other gas facilities as well as to the shore would expose them to military and terrorist dangers. Therefore any change in the import procedures would have to be approved by the energy and shipping companies and may require an increase in the ships' insurance premium.
In the coming weeks Israel will have to decide which option to carry out: either converting the first buoy into a permanent off shore regasification facility or building a second buoy and leasing a second FSRU.
SOURCE
