October 31, 2011 / 12:32 PM / 8 years ago

UPDATE 2-Israel signs deal for $140 mln off-shore LNG terminal

* Terminal to be built 10 km off Mediterranean coast

* LNG imports meant to stave off short-term gas shortage (Adds new gas contract, paragraph 7)

By Ari Rabinovitch

JERUSALEM, Oct 31 (Reuters) - State-owned Israel Natural Gas Lines said on Monday it signed a deal with Italian marine contractor Micoperi to build an off-shore liquefied natural gas terminal costing about 500 million shekels ($140 million).

The company said in a statement that the terminal, to be built some 10 kilometres out from the Mediterranean coastal city of Hadera, will have the capacity to receive about 2.5 billion cubic meters of gas each year.

Construction is due to begin in the second half of 2012 and be completed by the end of the year, the statement said.

Though natural gas production in Israel is set to soar in coming decades after the discovery of huge off-shore deposits, the country faces a short-term gas shortage between the time production goes online and its current reserves run dry.

Infrastructure Minister Uzi Landau said on Monday Israel could face a shortage as early as the third quarter of 2012, and that the terminal is a quick solution.

“The terminal is of the utmost strategic importance for the country’s ability to ensure a continuous energy supply to its power stations and to safeguard its energy security,” he said.

Underscoring Israel’s increasing dependence on natural gas, the company also announced on Monday a 15-year contract, valued at 450 million shekel ($125 million), to supply 1 billion cubic meters of gas annually to Dalia Power Energies, which is building Israel’s biggest privately-owned power station.

The Tamar field, the world’s largest off-shore find of 2009, is being developed some 90 km from Israel’s coast, but production there is not expected to begin until 2013, officials say. The even larger Leviathan field discovered a year later is not due to be on line until about 2017.

In the meantime, Israel’s sole working gas field is nearly depleted and gas supplies from Egypt have been continuously disrupted due to chaos and sabotage in the Sinai Peninsula.

Customers have already faced sharp increases in electricity rates as Israel Electric Corp has had to turn to alternative and more expensive fuels.

The off-shore LNG terminal is just one of Israel’s stop-gap solutions. The government has also instructed a number of energy companies exploring its territorial waters to speed up operations and threatened to let their licences expire if they do not meet their commitments.

Shmuel Turgeman, CEO of Israel Natural Gas Lines, said the terminal will meet “all planning and safety requirements in accordance with stringent international standards.”

The company said the terminal will be the unloading point for ships carrying the natural gas, which will then be fed directly into Israel’s underwater gas pipeline. (Editing by James Jukwey)

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