Israel Electric Corporation (IEC) (TASE: ELEC.B22) is considering the import of liquid natural gas (LNG) as an interim solution until natural gas from the Tamar field reaches the market.
The need to import gas has become urgent, because of delays in building the terminal for Tamar and delays in gas deliveries from Egypt's East Mediterranean Gas Co. (EMG). Meanwhile, gas supplies from Yam Tethys are running out. Yam Tethys currently provides two-thirds of IEC gas needs from fields offshore from Ashkelon.
In addition to LNG imports, IEC is considering increasing the use of coal to generate electricity. An IEC spokesman said that the measures were necessary "in view of an expected shortage of gas because of uncertainty about the opening of Tamar, which was sharpened yesterday by the National Planning and Building Commission's decision not to decide."
Yesterday, the National Planning and Building Commission decided that an environmental study will be conducted on building a marine terminal for Tamar, which could delay the terminal by at least six months. Tamar is supposed to come on line in 2012.
IEC CEO Amos Lasker has appointed a committee to examine LNG imports by tankers with gasification capability to convert the LNG back to gas for delivery to the national natural gas pipeline. Such a tanker costs $100 million.
An LNG tanker would be a much faster and cheaper alternative than building a permanent LNG gasification facility, which would cost $400 million. In the past, the Natural Gas Authority has suggested LNG imports through the Eilat Ashkelon Pipeline Company terminal at Ashkelon. Since the terminal is a national security facility, there is no need for approval of a national outline plan through the normal procedures.
The problem with LNG imports is the price: it costs $9.50-11.50 per million British Thermal Units (MMBTU), compared with $4-5 per MMBTU that IEC pays Yam Tethys and EMG. This price will force a sharp rise in electricity rates.
A second problem is that there are very few LNG tankers with gasification capability, and they are all reserved under long-term contracts.
IEC noted that the use of natural gas to generate electricity reached a new record of 40% of total production yesterday.
Published by Globes [online], Israel business news - www.globes-online.com - on July 8, 2010
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