Nochi Dankner's New Middle East

As far as is known, IDB management is looking at a collaborative venture with Qatargas, a Qatari government company (90%) that exports the natural resource.

Nochi Dankner's IDB group is holding preliminary talks to import liquefied natural gas to Israel from Qatar - even though the two countries do not have diplomatic relations. And the negotiations are in no way under the table: Israel's national infrastructures and foreign ministries are both involved in the talks.

If anything comes of this, the initial costs involved will run into billions of dollars.

The vision is to import large enough quantities of LNG to justify the tremendous investments. Not only is transportation via pipeline and tanker required, but also facilities to change the gas to liquid and back to gas.

The people at IDB promoting the idea are Zvi Livnat and Avi Fischer, who co-own the company along with Dankner. If the concept pans out, a newly formed company would probably be run by Livnat, but would be directly subject to Dankner himself.

As far as is known, IDB management is looking at a collaborative venture with Qatargas, a Qatari government company (90%) that exports the natural resource. The French company Total owns the other 10% of Qatargas. Qatar also markets through another government firm, RasGas, in which the American giant Exxon Mobil owns a 30% stake. Just this week, RasGas announced that it was adding seven new ships to its fleet to meet burgeoning world demand for LNG.

Qatar currently supplies about 15% of the world market for gas, making it the world's biggest supplier of LNG. The small country produces oil as well, but the government devoted more resources to developing its gas industry.

Making friends

The move would change the face of the IDB group, which is already the biggest, most sprawling holding company in the land. The investments would mark a huge leap into a wholly new area for IDB, which has holdings in almost every pie in Israel, but not in energy. It would also bring IDB into contact with rising powers in the world economy - the Gulf states' government funds, which are expanding in power together with similar institutions in Singapore, China and Russia.

The project would start with producing the gas in Qatar, liquefying it, shipping it in tankers to Aqaba in Jordan, unloading it at special terminals that would transform it back to gas, and then transporting it to Israel via pipeline.

Actually, the idea isn't a new one. A Qatari-Israeli alliance was envisioned a decade ago under the famous "New Middle East" vision, and was presented at the economic conference in Doha, the Qatari capital, in the mid-1990s.

At the time, Israel's Energy Ministry looked into the feasibility of the grandiose scheme, but concluded that the costs were sky-high and so was the political risk. What has changed since then? Energy prices have gone through the roof and the entire calculation of economic feasibility has changed. Also, since the 1990s, Israel's relations with Qatar have been relatively stable, despite the various upheavals in the Middle East.

International tender

IDB's interest in the whole matter was piqued by the discovery that the Israeli government plans to publish an international tender to build terminals for handling liquefied natural gas on Israel's shorelines. The tender would be for a BOT contract - build, operate, transfer - in which the winner would build the terminals, operate them for a given number of years (typically 20 to 25) and then give them to the state free of charge.

The winner would have to commit to supplying Israel with 4 billion cubic meters of gas each year, which would sell (at current prices) for some $30 billion.

The tender is supposed to be published in about a year and a half, and the resultant terminals would be ready to roll in 2014. This very week National Infrastructures Minister Benjamin "Fuad" Ben-Eliezer and Finance Minister Roni Bar-On will be bringing the concept of the tender before the Knesset's "socioeconomic cabinet" for discussion and a vote.

In recent weeks, IDB's leaders have been considering various alternatives for importing LNG to Israel. One idea is to build the regasification terminals for the Qatari gas in Eilat.

In fact, IDB has long been thinking of gaining a serious foothold in the energy sector, through group company Clal Industries and Investments. Clal already announced a venture in wind energy with Yossi Maiman's Ampal-American Israel Corp. (This company owns a stake in EMG, an Egyptian-Israeli natural gas consortium that imports gas to Israel and sells it mainly to the Israel Electric Corporation). Clal and Ampal are considering a wind farm in Greece at an investment of $200 million.

Also, a Clal subsidiary, American-Israeli Paper Mills (known here as Hadera Paper), holds a contingent license to build a co-generation power plant with 230-megawatt capacity on the site of its production plant. That plant is supposed to use natural gas as fuel.A unit of Nesher cement works also holds a permit to build a power plant on its land, next door to Ramle. That company has a 15-year agreement in place to buy natural gas to power the plant from EMG. In short, the market is there and the suppliers are few. Qatar is looking mightily attractive from these viewpoints.