For the first time, the Ministry of National Infrastructures, Energy and Water Resources will allow factories in Israel to buy imported liquefied natural gas (LNG), at $3.5 per million Btu, which compares with a price of $6 or more that they currently pay for gas supplied by pipeline from Israel's natural gas reservoirs.
Israel Electric Corporation (IEC) is buying the gas for its power plants, exploiting the historical lows in LNG prices resulting from the decline in demand caused by the coronavirus pandemic. The Ministry of National Infrastructures, Energy and Water Resources believes that surpluses of this gas could be used by many industrial factories that have signed agreements for gas supply by pipeline at much higher prices, and that are currently forced to use polluting fuel oil, which has also become much cheaper recently. Yesterday, the Natural Gas Authority issued a call for proposals to choose the entity that will buy the surplus LNG bought by IEC and sell it to industrial consumers and distributors.
IEC bought six cargoes of gas in the past few months at much lower prices than those of natural gas in Israel. The quantity of gas is sufficient to supply one third of industrial consumption in Israel for the next three months. Since the Ministry of National Infrastructures, Energy and Water Resources estimates that about 25% of the gas that IEC bought will not be used for power production, the surplus can be directed to industrial plants connected to the gas distribution network, enabling them to benefit from the cheaper prices.
At the same time as the call for proposals was issued, the permit from the director of the Natural Gas Authority to IEC to sell natural gas, enabling it to on-sell its LNG surplus to whomever submits the winning proposal, was published for public comment. The Ministry of National Infrastructures, Energy and Water Resources says that the price of the LNG plus overhead costs and commission will on average be less than $3.5 per million Btu for the quantities ordered by IEC. IEC leases the ship that receives the gas for $60 million annually, and it is capable of supplying an annual quantity of up to 3 BCM (billion cubic meters) of gas. In 2019, the Israeli economy consumed 11.25 BCM of gas, of which 8.81 BCM were used as fuel for power production, and 2.44 BCM were used in industry.
Published by Globes, Israel business news - en.globes.co.il - on June 1, 2020
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