Israel Gas Explorers Outperform as Egypt Unrest May Create Void
Jan. 31 (Bloomberg) --Israeli gas explorers are beating the benchmark Tel Aviv index as unrest in Egypt spurs speculation demand for locally produced fuel will rise as contracts with the Egyptian supplier of gas to the Jewish state are put at risk.
Five of the nine companies in the Tel Aviv 100 index that have risen the past two days are energy-related stocks, including billionaire Isaac Tshuva’s Delek Energy Systems Ltd. Ratio Oil Exploration 1992 LP jumped 7.3 percent to 0.619 shekel as of the close in Tel Aviv while Avner Oil Exploration-LP added 3 percent and Delek Drilling climbed 2.7 percent. The TA-100 index is down 3 percent since Jan. 27.
Investors are betting that turmoil in Egypt, where opposition groups are seeking to unseat President Hosni Mubarak, may impair the ability of East Mediterranean Gas Co., or EMG, to deliver on its contracts, creating a vacuum of energy demand for Israeli explorers to fill. Israeli companies made record gas discoveries off the Mediterranean coast in the past two years.
“Riots in Cairo may limit EMG’s ability to meet its gas supply deals,” Guil Bashan, a Tel Aviv-based analyst at IBI investment company, said in a telephone interview . “This increases the strategic importance of Israeli gas suppliers, their leverage and their potential to sign more deals.”
Ampal Deals
Ampal-American Israel Corp., the Herzliya, Israel-based company that holds a 12.5 percent stake in EMG and is Israel’s biggest supplier of gas, signed five deals valued at $5 billion to $10 billion to supply gas to units of Israel Corp., one of the country’s largest holding companies.
Mubarak is trying to quell unrest by putting police back on duty in Cairo and Ampal hasn’t reported any disruptions to its gas supplies. Israeli gas explorers expect that the Tamar field will only begin producing gas by the end of 2012.
Israeli Prime Minister Benjamin Netanyahu said on Jan. 30 his aim is to maintain the more than three-decade-long peace with Egypt. The two countries signed a peace treaty in 1979.
Israel’s Tamar and Leviathan gas discoveries may hold 25 trillion cubic feet of gas, double the U.K.’s proven reserves in 2009, Houston-based Noble Energy Inc., one of the partners in the finds, said on Dec. 29. While part of the supply contract with Israel Corp. is already signed with EMG, part is left open to be supplied either by EMG or Israel’s Tamar partners, according to Amir Kahanovich, an economist at Clal Finance Investment Management Ltd. in Tel Aviv.
Stocks Recover
The benchmark TA-25 index of stocks recovered 0.8 percent today to 1,292.75 at the close in Tel Aviv after plunging 3.8 percent yesterday, the most in almost two years. Ampal-American fell 19.2 percent in the past two days.
Ampal-American’s series Alef, Beit and Gimel’s A+ rating was placed on “watch list” with “negative” implications on Jan. 31 at Moody’s Midroog.
Egypt, which controls the Suez Canal, imported $147.3 million worth of good from Israel in 2010 while exporting $355.1 million to its neighbor.
“Israel’s main import from Egypt is natural gas which supplies a substantial portion of Israel’s power stations and which might be disrupted depending on how things develop,” said Terence Klingman, the head of research at Meitav Investment House Ltd. “With the significant gas finds in Israel’s offshore waters enough to supply needs for the next 50 years, the dependence on Egypt will be reduced.”
To contact the reporter on this story: David Wainer in Tel Aviv at dwainer1@bloomberg.net Ronit Goodman in Tel Aviv at rgoodman9@bloomberg.net;
To contact the editor responsible for this story: Claudia Maedler in Dubai at cmaedler@bloomberg.net.
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