AZERBAIJAN - Israel To Buy Azeri Light & Provide Passage To Eastern Markets.

Israeli Minister of National Infrastructure Benjamin Ben-Eliezer and Rovnag Abdullayev, the president of Socar on June 6 set crude oil supply negotiations in motion in Baku during Ben-Eliezer`s visit to the Azeri capital. "I'm here to open business with you", Ben-Eliezer told Abdullayev".

Israel buys one-sixth of its crude oil from Azerbaijan, but from AIOC 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 Azeri Light crude oil for its two oil refineries and for transportation to the Far East via the Eilat-Ashkelon pipeline to the Red Sea. This pipeline has been idle for most of the time since it was built to handle the transfer of Iranian crude. It was built during Iran's Pahlavi monarchy which used to have a special strategic relationship with the Jewish state.

Ceyhan is roughly 373 miles north of the Israeli port city of Ashkelon. The Eliat-Ashkelon pipeline represents an opportunity for Israel to become a major oil corridor to the east.

Israeli energy industry experts were in June quoted as saying other transport options for the BTC exporters, such as passage through the Suez Canal or shipping around the entire African continent, are much more expensive routes than the Eilat-Ashkelon pipeline. Energy business people then was quoted as saying said India was likely to become a key market for Azerbaijani crude oil through the Israeli outlet.

Mordechay Shalev, Eilat-Ashkelon Pipeline Co. deputy general manager, told United Press International (UPI) in Baku during the June visit of the Israeli team that India was among the key candidates to use this route. Ben-Eliezer urged Abdullayev to visit Israel and tour the pipeline.

In previous discussions of establishing an energy corridor in Israel, the idea was to extend the BTC pipeline by an underwater section from Ceyhan to Haifa, the Jewish state's northern port city on the Mediterranean. This is linked to Ashkelon and the Red Sea by Israel's own pipeline system.

But transporting Azeri Light between the two pipelines via tankers may be a more cost-effective scenario, Israeli Ambassador to Azerbaijan Arthur Lenk told UPI. 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 co-operation between the two countries.

The Israeli delegation then seemed optimistic about a possible crude oil deal, though Ben-Eliezer had said just two days earlier in June that the Jewish state should use less oil. He had said: "The Ministry of National Infrastructures is working to reduce the State of Israel`s dependency on oil". He had said Israel had spent nearly $6 bn on oil in 2005, adding: "It is my intention as national infrastructures minister to promote...energy conservation, renewable energy and the use of alternative fuels".

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 were going well, according to advisers to Ben-Eliezer, who talked of a major pipeline proposed to carry Russian natural gas from the south-western Turkish coast to Lebanon and Israel. The Turkish pipeline and gas distribution firm Botas has been actively pursuing this project as well.

Israel's talks with British company BG Group for the supply of natural gas from the Palestinian territory's offshore Gaza field broke down earlier this year over prices. The country imports all of its oil and has only one natural gas supplier, the jointly held Israeli and US firm Yam Tethys.

The Israel-Egyptian East Mediterranean Gas (EMG) is 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.

At Baku earlier on June 6, Ben-Eliezer met President Aliyev. Speaking in front of reporters at the start of the meeting, Aliyev told Ben-Eliezer partnership with Israel should not be only about energy; rather, Baku could benefit from Israeli high-tech, infrastructure and medical services. Later, as the two met privately with 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 UPI. On June 7 Ben-Eliezer met with Energy and Industries Minister Natik Aliyev who for many years used to be the CEO of Socar.