Moscow (Platts)--26Feb2013/546 am EST/1046 GMT

Gazprom Marketing and Trading has agreed on the main terms of a 20-year deal with Levant LNG Marketing for offtake from Israel's Tamar floating LNG project, the Russian company said in a statement Tuesday.

The Tamar floating LNG project is scheduled to be commissioned in 2017, and production is estimated at 3 million mt/year. The agreement was signed in Seoul Monday.

The consortium developing the Tamar and Dalit offshore gas fields, which will feed the LNG project, has also signed a letter of intent with Gazprom for the sale of 3 million mt/year (4.2 billion cubic meters) of LNG over a 20-year period, consortium member Delek Drilling said in a separate statement Tuesday.

Under the terms of the agreement the gas price would be linked to the price of Brent crude. The gas will be exported from the planned FLNG facility at the Tamar field located 90 kilometers off Israel's northern Mediterranean coast. The agreement calls for Gazprom to place financing for the FLNG project in the form of a direct investment.

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The signings follow a year of negotiations between Gazprom Marketing and Trading and the consortium, which comprises operator Noble Energy, with 36%, Avner Oil and Gas (15.625%), Isramco (28.75%) Dor Gas Exploration (4%) and Delek Drilling (15.625%).

In November 2011 the consortium signed a deal with DSME, NextDecade and D&H Solutions to jointly develop the floating LNG plant, with Levant LNG Marketing subsequently set up to market the plant's LNG.

Gazprom Marketing & Trading CEO Vitaly Vasiliev described the deal as "an important milestone" in terms of Gazprom's strengthening position in the global LNG market, according to the company's statement.

"We are confident that this deal will not only help strengthen and diversify Gazprom's LNG portfolio, but also help Gazprom Marketing & Trading build on our success in the Asia-Pacific region, where we have recently closed long and medium-term deals with numerous counterparties in India and Northeast Asia," Vasiliev said.

In October Gazprom Marketing and Trading signed a deal to supply South Korea's Kogas with up to 1 million mt of LNG in 2013/2014. In the same month it also signed a 20-year deal with India's GAIL to supply 2.5 million mt/year, with deliveries slated to begin in 2019.

The Tamar partners stressed that the agreement with Gazprom will not have an impact on supplies to the Israeli domestic market. The consortium has signed eight supply agreements with local customers with a commitment to supply around 170 Bcm of gas over the next 15 years. Commercial production is due to begin in April.

The Tamar field has estimated resources of 274 Bcm. Gas from the field is expected to be the sole local source of supply in the coming years.

The cost of developing the field is put at $3 billion, not including the FLNG.

"The signing of the agreement in principle with Gazprom is not only an important cornerstone for advancing the FLNG project but also represents strategic cooperation with a leading international player," said Gideon Tadmor, chairman of Delek Drilling and CEO of Avner Oil and Gas. The proposed FLNG project is expected to be one of the first in the world.

Delek Drilling said the agreement with Gazprom is subject to the receipt of all necessary regulatory approval.

The Israeli government has yet to approve the recommendations of a panel of experts on gas export policy. The new Israeli government is expected to take up the matter once it is formed. The panel issued its report in August and recommended the government approve the export of up to 500 Bcm of gas through 2040, or approximately 50% of the country's current estimated reserves. However, there is growing opposition to this and a final agreement with Gazprom will depend on the new government's position.

--Rosemary Griffin, rosemary_griffin@platts.com
--Neal Sandler, newsdesk@platts.com

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