INTERVIEW: Israel gas pipeline firm seeks investors, plans bond sale

Israel’s energy independence is well within its own grasp, but to achieve that a combination of  private investment and public debt sales will be necessary, Israel National Gas Lines Chairman Ron Chaimovski said on Thursday. Chaimovski, in New York to meet with energy services and infrastructure companies as well as private equity investors, said the state-run company will come to the capital markets to raise money in the next three years.

INGL was created by the Israeli government in 2003 to build and run natural gas lines to feed its growing economy and may even be able to utilize them to transport energy to its Arab neighbors.


 The lion’s share of new production will come from the Tamar and Leviathan fields, which together contain an estimated 728 billion cubic meters of gas or more than 50 years of domestic supply, Chaimovski said.

 The Tamar field comes online in late April, while the Leviathan field is expected to start production in 2017. U.S.-based Noble Energy helped develop both fields which are situated off Israel’s northern coast in the Mediterranean Sea.

 « We are seriously looking at going public with bonds. My goal is 2013 to go public, to be registered on the Israeli Stock Exchange, » said Chaimovski, who served in the Navy before becoming a businessman. He has served in the post since late October 2010 on a salary of 1 Israeli shekel a year.

 « The interest rate for (INGL) bonds will go down as a fully public company and my personal belief is that a government company, which is (partially) public, is behaving much betterthan a fully-owned company that is under the radar, »  Chaimovski told Reuters in an interview.

 « I wish it would be a mixed company which means the public will buy equity, 25 percent. But the government is not for it, » he said.

 Chaimovski said INGL is looking to raise between $800 million to $1 billion in public debt, mostly likely sold in Europe.

 The company has spoken with Barclays Capital, Citi, and Deutsche Bank about a possible sale, although it is up to market forces whether it will be denominated in euros or U.S. dollars.

 INGL has sold over 2 billion shekels worth of bonds through private offerings since the company was founded. The tenor of those bonds is between 8-1/2 and 10-1/2 years with an average interest rate of 4 percent, he said.

 « That’s without a government guarantee, » said Chaimovski,  who was previously Israel’s economic envoy to North America.

New gas pipelines and storage caverns have been proposed across Israel, including a line that would link the south with the north. Two companies will be chosen within the next two weeks for contracts to build the north-south conduit, including a spur to Jerusalem.

 The push to build out its gas infrastructure has a potential added benefit of creating a gas supply hub for the region that he hopes could even help warm relations with its Arab neighbors.

 « Peace is good for business and business is good for peace, » Chaimovski said, adding that preliminary talks with some of its neighbors have begun.

 Chaimovski said LNG brought into Israel from overseas sources could be transported via its pipes to supply surrounding nations.

 Natural gas currently makes up 40 percent of Israel’s energy mix, but Chaimovski said the plan is to raise that to 80 percent within two or three years.

 INGL is currently talking to two companies, one from Germany and one from Holland, about building an $8 billion to $15 billion liquefied natural gas (LNG) export plant that, depending on the size, would liquefy up to 10 bcm a year of domestically-produced gas for shipment overseas, Chaimovski said.

 « But I want to add that we are interested in having American companies participate in this project too, » he said.

 Israel’s current pipeline capacity is 10 bcm but Chaimovski believes it can eventually be tripled by 2015.

 In the meantime, however, Israel is importing LNG from a small floating terminal offshore to make up for a shortfall in supply after Egypt terminated a crucial 20-year supply deal last April.

 Britain’s BP delivered the first cargo at end of last month, the first of a two-cargo deal, which may be extended to include another five to 10 cargoes, Chaimovski said. Each cargo saves the country 100 million shekels, he said, as the LNG imported is cheaper than alternative diesel and renewable fuels.

 Chaimovski declined to say how much Israel was paying for the imported LNG, though benchmark prices for the shipped fuel in Asia have risen in recent weeks towards record highs above $19 per million British thermal units.

 While Israel may not be paying quite that much – LNG prices in the Atlantic Basin tend to be a few dollars lower. In the United States, where supplies are abundant, gas prices are around $3.


Reporting By Daniel Bases and Edward McAllister; Editing by Bob Burgdorfer. You can see the original article here.

Israel Natural Gas Lines Co. Ltd., a government owned company, was founded in 2003, to establish and operate a network of natural gas pipelines for transporting the compressed gas through a national network to all parts of Israel. You can read more about Israel National Gas Lines here.

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