Chevron allows Tamar partners to sell gas separately

Tamar field Photo: Albatross

The new agreement announced by the Israel Competition Authority will save Israel Electric Corp. NIS 100 million.

The dispute between the partners holding rights to the Tamar and Leviathan offshore gas fields, which has been continuing over the past year, has finally been resolved, resulting in estimated savings of NIS 100 million for the Israel Electric Corporation (IEC) (TASE: ELEC.B22). From now on the Tamar Partners Isramco, Tamar Petroleum, Dor Gas and Everest Infrastructures, who hold 53% of the rights to the Tamar field will be abler to sell gas more cheaply to the IEC.

This ends a protracted standoff in which Noble Energy, (which was subsequently acquired by Chevron), the operating partner in both the Tamar and Leviathan fields, prevented the other Tamar partners from competing with the Leviathan field.

Israel Competition Authority head Michal Halperin today published an order that anchors an agreement signed yesterday between the Tamar Partners that allows each of them to sell gas separately according to their proportionate holding of rights in the field.

Following this the partners and companies today reported a signed amendment to the gas supply agreements with the IEC and the Tamar and Leviathan fields. The amendments that were signed with all the partners arranges, among other things, the price of gas purchases from October 2020 until June 2021, when there will be a more significant revision of prices that could be significantly cheaper.

Chevron, which last year bought Noble Energy, has a 25% stake in the rights of Tamar and a 40% stake in the rights of Leviathan and is the operator of both fields.

The Public Utilities Authority for Electricity was forced to intervene after most of the Tamar Partners and the IEC claimed that Noble Energy was refusing to allow gas to flow according to a new agreement. After the complaint the Israel Competition Authority opened up an investigation to see if Noble was taken advantage of the situation for its own gain. Before the regulator investigated the matter, Noble asked to reach an agreement.

As part of the new understandings between the sides, the prices of gas has been cut compared with existing agreements with Tamar and Leviathan until the price will be opened in a new agreement before the end of June 2021. The Israel Electric Corp. estimates that the new price will save it more than NIS 100 million from the original agreement.

In September 2019, Isramco and Tamar Petroleum closed a deal to sell gas to the IEC at $4.3 per thermal unit over 18 months. The agreement was designed to bring back to Tamar the volume of gas it had lost to the Leviathan Partners in the April 2019 tender, in which both Leviathan and Tamar had submitted an identical offer of $4.8 per thermal unit. However, the IEC chose Leviathan in order to diversify sources.

Tamar's original supply contract with the IEC, which is still running, is at $6.3 per thermal unit. This contract is expected to be revised down sharply in price at the start of July 2021.

IEC chairman Yiftah Ron-Tal said, "The IEC continues its determined campaign to cut gas prices and reduce costs of production and thus bring good news to the public of the cheapest price in Israel. The opening of the agreements with the gas companies and the conduct of the negotiations that has led to the saving of more than NIS 100 million is an exceptional achievement as part of the campaign to cut the cost of living in Israel especially during the current crisis.

Chevron East Mediterranean manager Jeff Ewing said, "Chevron is committed to work in cooperation with all the parties at interest in Israel in order to achieve mutually productive results. The settlement obtained yields positive results for all the parties at interest including electricity consumers and brings this complex commercial dispute to a close."

Minister of Energy Yuval Steinitz said, "Following the gas outline agreement the monopoly has been totally dismantled and the competition between three fields and three different energy companies increases the IEC and other electricity producers bargaining powers and this has led to a significant fall in prices in all sectors. Cheaper prices, reduced air pollution and natural gas exports to Jordan and Egypt have all been realized and the revenues for all Israel's citizens will amount to tens of billions shekels annually within four years.

Published by Globes, Israel business news - en.globes.co.il - on January 31, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Tamar field Photo: Albatross
Tamar field Photo: Albatross
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018