IEC agrees to pay more for Egyptian gas

Yam Tetis consortium indignant at what it calls "unequal" treatment of different natural gas suppliers by state-owned company.

By EHUD ZION WALDOKS
August 31, 2009 23:47
2 minute read.

The Israel Electric Corporation's board of directors approved changes to its contract with Eastern Mediterranean Gas on Thursday increasing the rate EMG will pay for natural gas from Egypt and reducing the amount it will purchase. EMG buys the gas from an Egyptian company for sale in Israel. The local Yam Tetis consortium was indignant at what it called the "unequal" treatment of different natural gas suppliers by a state-owned company. A cabinet decision has set a goal of producing 40 to 45 percent of the nation's electricity from natural gas by 2020, in place of the less environmentally friendly oil or diesel. At present, natural gas is used to produce 32% of the electric supply, but holdups in the construction of a gas pipeline to Haifa continue to produce severe environmental and financial costs. Moti Friedman, the chairman of IEC's board, said the new basket of natural gas supplies would allow cheaper production of electricity and a significant reduction in emissions. Since the contract with Eastern Mediterranean Gas was signed in 2005, supplies of gas from Egypt has been irregular and at times nonexistent. An Egyptian court halted all transfers for a while, in order to examine allegations that the price the Egyptian company was charging Israel was too low. Thursday's approval of changes raises the price from that agreed upon in the original tender, and has incensed domestic competitor Yam Tetis. Yam Tetis is a partnership of Noble Energy, Delek Drilling, Avner Oil Exploration and Delek Investments, and produces natural gas off the Mediterranean coast. The consortium sent a number of letters this week to the IEC's directors, demanding equal treatment and condemning the IEC's "rewarding" what it said amounted to a series of contract violations on the part of Eastern Mediterranean Gas. Yam Tetis said it had warned the IEC at the time the tender was awarded that the price offered by EMG was too low. However, the IEC ignored the warning and then forced Yam Tetis to accept the same price for its natural gas, Yam Tetis said. "In light of the IEC's decision to raise the price it would pay for natural gas from EMG in comparison to the original price set in the tender, we expect the IEC to announce to the Yam Tetis partnership with all speed a change in contractual conditions mirroring that given to EMG, among other things because of the principle of equality IEC is obligated to uphold as a public entity," the consortium said in a statement on Thursday. IEC CEO Amos Lasker said that only by having more than one supplier would IEC be able to meet the government's goals. In addition to Yam Tetis and Eastern Mediterranean Gas, Israel has been in extended negotiations with Britain's BG Group regarding gas fields off the Gaza coast. However, those negotiations have reportedly been stalled for the past few years.


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