Israeli gas grid to be retendered

23 August 2002

The Israeli government has cancelled the tender for the project to set up a nationwide natural gas network and plans to split the project into two packages. The decision ends several weeks of uncertainty surrounding the project, which was left in disarray following the annulment of an agreement with an Israeli consortium in early August and the withdrawal in April of Belgium's Tractebel, the international partner in the consortium (MEED 9:8:02).

Deputy infrastructure minister Naomi Blumenthal on 21 August told MEED that the government would break up the estimated $400 million project into two packages. The first will cover the construction of the Ashdod-Gezer pipeline by a government-appointed contractor. The scope of the estimated $40 million project may be extended to incorporate an offshore pipeline link to the northern Israeli city of Hadera.

A new tender is expected to be issued within weeks for the second package, which will cover the construction of the bulk of the gas grid. The government has yet to decide on conditions and time schedule for the new tender.

'There will be a new tender for the country-wide network and it will be similar to the first one, but obviously exclude the Gezer-Ashdod section,' says Blumenthal. 'We want to see the private sector involved on a BOT [build-operate-transfer] basis.'

It is not yet clear whether the Israeli consortium comprising Africa Israel Investments, Beitmannand Paz Oil Companywill bid again for the project or whether it will take legal action against the government decision. The group had been declared winner of the scheme earlier this year, but the contract was cancelled on 4 August on the grounds that the companies could not meet the government's requirements without Tractebel. The Israeli firms in mid August submitted a revised proposal for the project including Russia's ITERAas foreign partner but the government rejected the offer. Talks with the UK's BG Groupabout taking a foreign stake turned out to be unsuccessful.

'We are waiting for the government to give us a reason why the offer did not meet its requirements,' a representative of the consortium said on 20 August. 'We are now carefully considering our next steps.'

The government says that despite the cancellation of the tender, initial start-up of the gas grid remains scheduled to come on stream in early 2004, with full operations set to begin in 2005.

A team comprising the local Tahal Consulting Engineersand a Dutch firm are consulting the government on the project.

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