BG still on track for third train

02 June 2006
The UK's BG Group is moving ahead with plans to use natural gas from its offshore Gaza marine field as feedstock for a third liquefied natural gas (LNG) train at the Idku site of the Egyptian LNG (ELNG) project, in which it is a shareholder. The decision follows BG's mid-May withdrawal of talks with Israel to supply Gaza gas due to price disagreements.

BG together with Egyptian Natural Gas Holding Company (EGAS), one of its partners in the ELNG holding company as well as in trains 1 and 2, is expected to take initial steps towards implementing the third train project, including launching technical and legal studies. Progress on the project has so far been held back due to lack of gas feedstock. BG now hopes to develop the train in tandem with its Gaza concession. The field, in which BG holds a 90 per cent stake, is to supply half of the train's feedstock, with the other half to be sourced from Egyptian fields. BG has already issued two front-end engineering design (FEED) tenders for the onshore and offshore portions of the field development, according to a senior BG source.

BG had originally planned to sell gas from the Gaza marine field to Israel. However, negotiations between the two sides ended in mid-May due to disagreement over the gas price. Israel had offered to pay $3.10 a million British thermal units (BTUs), well below the present international gas price of $7-$10 a million BTU. The Israeli bid 'was not even competitive', says the source.

Last year, Cairo and Tel Aviv signed a memorandum of understanding (MoU) on the long-delayed project for Egypt to supply gas to Israel by subsea pipeline. Under the terms of the MoU, Egyptian/Israeli consortium East Mediterranean Gas (EMG) a 75:25 joint venture of Egyptian General Petroleum Corporation and private Israeli company Merhav will supply 7,000 million cubic metres a year of gas to Israel Electric Company (IEC) for a period of 15 years (MEED 24:6:05).

The gas will be transported through a pipeline running from El-Arish in Egypt to Ashkalon in southern Israel.

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