Severe disruptions in the natural gas supply from Egypt has forced Israel Electric Corporation (IEC) (TASE: ELEC.B22) to switch its Eshkol power station at Ashdod from gas to heavy industrial oil. The power station has four generators with a total capacity of 1,000 megawatts. The utility is worried that any breakdown at any large power plant could force shortage management in which it initiates power outages.
Yesterday, Egypt's East Mediterranean Gas Co. (EMG) unexpected reduced gas deliveries to IEC from EMG's terminal at El Arish in Sinai, prompted IEC's switch to oil at the Eshkol plant. Heavy industrial oil is more expensive and more polluting than natural gas.
Last week, "Globes" reported that similar disruptions forced another EMG customer, Nesher Israel Cement Enterprises Ltd. to turn to Yam Tethys, owned by Yitzhak Tshuva-controlled Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc (NYSE: NBL) for gas.
IEC calls the gas supply disruption a "serious incident" as the utility gears up for peak demand expected today and tomorrow because of the hot weather. In a special announcement today, IEC asked the public to use electrical appliance in the early morning or late evening. IEC expects electricity demand to top 10,000 megawatts today and tomorrow, and the company's maximum capacity is 10,800 megawatts because a generator at its Alon Tabor Power Station is offline.
IEC said that it received no advance warning from EMG about the disruption. IEC executives said that it was promised that regular gas flow would resume this evening, but meanwhile the disruptions are still continuing.
IEC officials said that the incident demonstrates their warnings of over-reliance of natural gas for electricity production. "We've been constantly shouting that there are problems with the reliability of natural gas supply, and today we've gotten proof," said an official.
Egyptian businessman Hussain Salem owns 28% of EMG, Egyptian Natural Gas Holding Company owns 10%, Thai energy giant PTT Public Co. Ltd. owns 25%, Yosef Maiman owns 20% through Ampal-American Israel Corporation (Nasdaq: AMPL; TASE:AMPL) and his private company Merhav MNF Ltd., and Israeli institutional investors own 4.4%. Merhav has not commented.
Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2010
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