Israel negotiates oil purchase with Azerbaijan

Jun 07, 2006 02:00 AM

Israeli Minister of National Infrastructures Binyamin Ben-Eliezer and Rovnag Abdullayev, the president of the Azerbaijani state oil company SOCAR, set oil purchase negotiations in motion during Ben-Eliezer's visit to the Caspian country.
"I'm here to open business with you," Ben-Eliezer told Abdullayev.

Israel buys one-sixth of its oil from Azerbaijan, but from a consortium rather than directly from SOCAR, according to the chairman of Israel's Oil Refineries Ltd., Ohad Marani.
Abdullayev and Ben-Eliezer discussed starting talks on a deal under which Israel would buy Azerbaijani oil for its two oil refineries and for transportation to the Far East via the Eilat-Ashkelon Pipeline to the Red Sea. Azerbaijani oil arrives at the Turkish Mediterranean Sea port of Ceyhan via the recently inaugurated 1,058-mile Baku-Tbilisi-Ceyhan Pipeline, the second-longest oil and gas pipeline in the world.

Ceyhan is roughly 373 miles north of the Israeli port city of Ashkelon. The Eilat-Ashkelon Pipeline represents an opportunity for Israel to become a major oil and gas corridor. Israeli energy industry insiders said other transport options such as passage through the Suez Canal or shipping around the entire African continent are much more expensive routes than the Eilat-Ashkelon Pipeline.
The energy businessmen said India was likely a key market for Azerbaijani oil and gas. Oil from this Caspian Sea country is light, good for high-octane gasoline, Mordechay Shalev, Eilat Ashkelon Pipeline Co. deputy general manager, told.

Ben-Eliezer urged Abdullayev to visit Israel and tour the pipeline. In previous discussions of establishing an energy corridor in Israel, the idea of extending the BTC pipeline underwater from Ceyhan to the Israeli port cities of Haifa and Ashkelon. But transporting the oil between the two pipelines via tankers may be a more cost-effective scenario, Israel's ambassador to Azerbaijan, Arthur Lenk.
At the meeting in SOCAR's Baku offices, Shalev briefed Abdullayev on the Eilat-Ashkelon Pipeline's capabilities, and Oil Refineries' Marani spoke of looking forward to cooperation between the two countries.

The Israeli delegation seemed optimistic about a possible oil deal, though Ben-Eliezer said just two days ago that the country should use less oil.
"The Ministry of National Infrastructures is working to reduce the State of Israel's dependency on oil," he said via a ministry statement announcing that the country had spent nearly $ 6 bn on oil in 2005. "It is my intention as national infrastructures minister to promote... energy conservation, renewable energy and the use of alternative fuels," Ben-Eliezer continued.

Israel has been courting international energy companies aggressively over the past several months in efforts to increase competition in the concentrated market. Talks with Russian giant Gazprom are going well, according to advisers to Ben-Eliezer, while talks with British company BG Group broke down over prices.
The country imports all of its oil and has only one natural gas supplier, the jointly held Israeli and American company Yam Tethys. Israel-Egyptian company East Mediterranean Gas is set to enter the Israeli market in late 2007. But because Yam Tethys has already promised away most of its reserves, any potential new customers, such as private power stations looking to compete with the state-run Israel Electric Corp., would only be able to buy from EMG.

Earlier, Ben-Eliezer met for nearly an hour with Azerbaijani President Ilham Aliyev. Speaking in front of reporters at the beginning of the meeting, Aliyev told Ben-Eliezer that a partnership of Israel should not be strictly about energy; rather, Azerbaijan could also benefit from Israeli high-tech, infrastructure and medical services. Later, as the two met privately with their advisers, Ben-Eliezer expressed hope that Azerbaijan would soon set up an embassy in Israel, according to those present at the meeting.
"It was an excellent meeting," Ben-Eliezer told afterward. Ben-Eliezer plans to meet with Azerbaijan's energy minister.

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