Israel Corp. puts ball in Tamar partners' court

Israel Corp. says Tamar partners must commit to a delivery timetable if they aim to win part of the second $4 billion gas contract.

Who will win the second part of the 20-year natural gas supply contract to Israel Corporation (TASE: ILCO)? After the company, controlled by the Ofer family, signed a $4 billion gas supply contract with Egypt's East Mediterranean Gas Company (EMG) in December, the battle for the second half of the contract, also worth $4 billion, has begun.

Israel Corp. opted for EMG over the partners in the Tamar gas discovery because of the uncertainty about Tamar's development in the wake of the release of the Sheshinski committee's interim recommendations. Israel Corp. was worried about delays in Tamar's development, so decided to sign with EMG.

Israel Corp. has now written to the Tamar partners, stating that if they want to sign the second gas supply contract with it, they must commit in writing by February to meet the gas delivery timetable. Noble Energy Inc. (NYSE: NBL) owns 36% of Tamar, Delek Group Ltd. (TASE: DLEKG) subsidiaries Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L) each own 15.625%, Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) owns 28.7%, and Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) unit Dor Alon Energy Exploration Ltd. owns 4%.

In other words, Israel Corp. has put the ball in the Tamar partners' court, and it will be interesting to see their response. After the Sheshinski committee published its recommendations, the Tamar partners said that the recommendations would delay development of the Tamar field, and result in preference for Egyptian gas over Israeli gas. The Sheshinski committee countered that this was a pressure tactic by the Tamar partners on the government to soften the recommendations.

The main change in the past month has been the publication of the Sheshinski committee's final recommendations, which are softer than the interim recommendations, implying a larger return on Tamar. Later this week, Prime Minister Benjamin Netanyahu will announce his position on the matter, which he will submit to the cabinet for approval.

The Tamar partners will reportedly wait for Netanyahu's decision before replying to Israel Corp.'s letter.

Published by Globes [online], Israel business news - - on January 17, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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