(Adds details, background, BG comments, share reaction)
By Steven Scheer
JERUSALEM, June 29 (Reuters) - The partners in Israel'sgiant Leviathan natural gas field said they had signed apreliminary agreement with British oil and gas company BG Group (LSE: BG.L - news) to negotiate a deal to export gas to BG's liquefiednatural gas (LNG) plant in Idku, Egypt.
In the deal under discussion, Leviathan - off Israel'sMediterranean coast - would supply 7 billion cubic metres (bcm)annually for 15 years via an underwater pipeline, the partnerssaid in a statement on Sunday.
An energy source in Tel Aviv said such a deal would be worthabout $30 billion - providing a windfall to Israel's coffersfrom royalties. The source said the pipeline would be built byBG and a final agreement was expected by the end of 2014.
Such a a deal would be among the largest in Israel'sfledgling energy sector and would help the partners developLeviathan - which holds an estimated 19 trillion cubic feet ofgas (530 bcm) and is expected to go online in 2017. Much of thereserves are earmarked for export.
BG said the Leviathan talks were one of several options itwas considering to increase the supply of gas to its Egyptianplant. "While this non-binding letter of intent with theLeviathan partners is a first step, it is very early days," saida spokesman.
The talks with BG - which exports to more than 20 countries- come after Woodside Petroleum (Other OTC: WOPEF - news) , Australia's top gasproducer, last month ditched plans to take a stake worth up to$2.7 billion in Leviathan.
Texas-based Noble Energy (NYSE: NBL - news) is the field's operatorwith a 39.66 percent stake. Avner Oil and DelekDrilling, subsidiaries of Delek Group (Other OTC: DGRLY - news) ,hold a combined 45.34 percent, and Ratio Oil has theremaining 15 percent.
Shares of Avner were 1.8 percent higher, while DelekDrilling's shares were up 1.1 percent and Ratio's shares gained3.5 percent in midday trading in Tel Aviv.
Delek and Avner last month raised $2 billion in aninternational bond offering to help fund Leviathan'sdevelopment.
The gas unit of Turkish fuel retailer Turcas isholding non-binding talks with another company to jointlyprocure natural gas from Leviathan, while Leviathan's partnershave also started looking into selling gas through a pipeline toCyprus.
BG's first-quarter exploration and production volumes fell 4percent, hit by output problems in Egypt where the company's LNGproject failed to deliver any cargoes in the quarter.
Production in Egypt fell 35 percent compared with the fourthquarter as the reservoir feeding its plant is in decline and thelocal Egyptian market took more supply, for which BG receiveslower payments.
BG said Egypt's government has not honoured its agreementsand is diverting more gas for the domestic market. (Additional reporting by Tova Cohen; Editing by Andrew Heavens)