BG Group Plc share price up, reaches a preliminary agreement with Israel-based Leviathan on a 30-billion-dollar gas supply deal

One of the subsidiaries of BG Group Plc signed a letter of intent to start negotiations with partners in the Israel-based Leviathan offshore natural gas field. The talks are considered to be about the supplies to one of the companys gas-liquefying plant located in Egypt via a new undersea pipeline.

According to a person close to the process, the deal amounts to 30 billion dollars, which covers only gas sold. The value of the pipeline, which BG Group is expected to build, is excluded from that price.

BG Group Plc said in a statement that was cited by the Financial Times: “We are looking at a number of options for increasing the supply of gas to the Egyptian LNG facility, and this is one of several currently under consideration.” The company also described the preliminary agreement reached with Leviathan as “a first step” towards supplying its factory in Egypt with gas. Still, BG Group explained there was a long way to go before the deal is to be finalized.

If concluded, the agreement between the two companies would be the largest cross-border deal of such type ever. The preliminary agreement between Leviathan and BG Group Plc sets out terms of the deal, including the sale of 7 billion cubic meters of gas on a yearly basis for a period of 15 years. According to a statement made by the companies, the final price of the deal is yet to be decided.

One of the analysts who work at IBI-Israel Brokerage & Investments Ltd – Guil Bashan commented the agreement in a telephone interview, which was cited by Bloomberg: “This is an opening shot for the development of Leviathan. The supply at the platform implies BG will be building the pipeline and all the infrastructure to transport the gas, which means much lower capital expenditure and lower risk for the Leviathan partners.”

BG Group Plc added 0.32% to trade at 1 250.5 pence per share by 8:42 GMT in London, marking a one year change of +11.80%. The company is valued at 42.49 billion pounds.