Israel eyes LNG tender to diversify energy supply

TEL AVIV, June 5 Tue Jun 5, 2007 3:40pm BST

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TEL AVIV, June 5 (Reuters) - Israel will likely publish its first tender for construction of a liquefied natural gas (LNG) terminal by the end of 2007 to diversify its energy sources, National Infrastructure Minister Binyamin Ben-Eliezer said.

Ben-Eliezer said on Tuesday the tender would be for the building of a $500 million LNG facility and the location would be determined soon.

"We are looking to publish the tender for LNG by the end of the year," he told Reuters on the sidelines of a United Nations-sponsored economic conference.

An LNG facility "would allow Israel to import liquefied natural gas from all over the world," Ben-Eliezer said.

An aide to Ben-Eliezer said the tender could reach as much as $5 billion if it were combined with the purchase of the gas. He added that a feasibility study was in its final stages and that eight locations on Israel's Mediterranean coast were being looked at to build the facility.

The minister said the project, like most other recent infrastructure undertakings in Israel in recent years, will be a state initiative but funded by the private sector.

He said Israel needed to secure energy from a number of sources in case of a further rise in fuel prices or should global supplies of fossil fuels start to run out.

ACUTE NEED

"The need to secure a supply of energy is even more acute for Israel, for the most part due to Israel's problematic geopolitical location on the one hand and the fact that the lion's share of the world's energy sources lie in the Arab world," Ben-Eliezer said at the conference.

Israel was also in talks with Turkey to create an "infrastructure corridor", a project of about $3 billion, where Israel would import fuel and water through a pipeline from Turkey's Ceyhan port.

"The planned infrastructure corridor between our two countries would include pipelines for the transport of natural gas, oil, water and possibly even electricity," he said, noting Turkey was important to Israel from both a political and energy perspective.

Israel and Turkey recently signed a memorandum of understanding to see the project through. The first step will be to carry out a feasibility study to determine the technical and economic aspects of the project.

Ben-Eliezer said he was in the process of obtaining part of the financing for the project from the European Investment Bank.

"The final implementation of the infrastructure corridor will assure Israel continuous supply of energy and water, as well as creating a potential for export to the Far East," he said.

As part of Israel's energy diversification plan, state-owned Israel Electric Corp (IEC), signed a $2.5 billion, 15-year deal to buy 1.7 billion cubic meters of gas from Egypt.

Egypt will be a secondary supplier to a U.S.-Israeli group that is developing natural gas off Israel's southern Mediterranean coast.

Ben-Eliezer said Israel was in talks with Russian gas company Gazprom (GAZP.MM) for the import of gas and the Israeli government continues to negotiate with British Gas (BG.L) to tap into a natural field BG discovered off the Gaza Strip.

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