leviathan gas drill.
(photo credit: (Albatross))
In a sharp setback for the partners developing the Tamar natural-gas lease in
the Mediterranean Sea, several Israel Corporation subsidiaries on Monday signed
long-term natural-gas supply contracts with Egyptian supplier East Mediterranean
Gas Company (EMG).
The companies are Israel Chemicals Ltd., Oil
Refineries Ltd. and OPC Rotem Ltd.
EMG shareholder (12.5 percent)
Ampal-American Israel Corporation said EMG has signed five gas-sale agreements.
It also listed IC Power Ltd. and ICL wholly-owned subsidiary Dead Sea Works Ltd.
among the customers.
Ampal said the agreements were for a total quantity
of 1.4 billion cubic meters annually for 20 years, with an option to buyers to
increase the total quantity up to 2.9 b.cu.m. annually. The total value
of the five contracts is $5 billion-$10b. Gas delivery is scheduled to
commence next year.
The gas-supply contracts follow the difficulties that
the Tamar gas-field developers have been facing lately.
OPC Rotem will
purchase 300 million cubic meters to 600 m.cu.m. of gas a year for its planned
440-megawatt power plant. The value of its gas purchases can reach
Israel Chemicals’s gas-supply contract is through
2030. The company said the contract is in addition to its contract with
Yam Tethys, signed in 2008, and the hook-up to the natural-gas pipeline in
December 2009. The new contract guarantees gas supplies to the company’s
plants, which switched to gas for their electricity production a year
Israel Chemicals subsidiary Dead Sea Works Ltd. will buy 200 m.cu.m.
of gas a year from EMG for its power plant planned for Sdom. Israel
Chemicals has an option (through March 31, 2011) to buy an additional 530
m.cu.m. of gas for industrial use and power production. The purchase of gas for
the new power plant is subject to a decision on its construction and the
obtaining of building permits, which are due by June 2012.
Chemicals’s contract is worth $370 million- $460m. through 2030, not including
the option, depending on the final terms. The contract includes a floor and
“The switch to natural gas greatly improves the
environmental protection of energy production by the plants in the South and
greatly reduces the cost of energy,” ICL Fertilizers CEO Dan Chen said
Monday. “The new contract is an important step toward guaranteeing Israel
Chemicals’s energy supply through 2030.”
Oil Refineries (in which Israel
Corp. holds a 37% stake) signed a 20-year gas-purchase contract with EMG for its
refinery and for its subsidiaries Carmel Olifins Ltd. and Gadiv Petrochemicals
Industry Ltd. Oil Refineries said the switch from heavy industrial oil to
natural gas as the company’s primary source of energy would save it $130m. in
direct energy costs.
Oil Refineries also expects savings in energy
consumption, maintenance costs and improved operating efficiency. The
switch to natural gas will also greatly reduce emissions.
The price of
the gas will be set by a formula based on the price of oil. It includes a floor
and ceiling price and a take or pay commitment for the minimum quantity of gas,
in accordance with the mechanism set out in the contract.
Refineries’s contract is worth $1.8b.-$2.9b. over 20 years. The actual amount
will depend on the amount of gas purchased, the terms set and price of oil.
Delivery will begin when the National Gas Pipeline reaches Haifa Bay, which is
scheduled for the first quarter of 2011. Oil Refineries has already completed
the installation of the necessary hook-ups to the pipeline and receipt of the
“We continue to invest in activities to strengthen the company,” Oil
Refineries CEO Yashar Ben-Mordechai said Monday. “This contract and completion
of the switch to natural gas as Oil Refineries’s primary source of energy,
together with many other investments, will position the company as one of the
leading and environmentally friendly refining and petrochemical companies in the
Mediterranean Basin and in compliance with Western European
standards. This is a strategic step that meets immediate needs for the
rapid transition to natural gas use.”