Israel Electric Corporation (IEC) (TASE: ELEC.B22) has announced that it will buy 4 billion cubic meters (BCM) of natural gas from the Leviathan partners over two years. The Leviathan gas field is due to start producing gas in October this year.
The Leviathan partners competed with the Tamar partners in a non-tender pricing procedure for the deal. In effect Delek Drilling LP (TASE: DEDR.L) controlled by Yitzhak Tshuva and Noble Energy Inc. (NYSE: NBL), which are major stakeholders in both gas fields, were competing between themselves.
However, Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), which has a 28.75% stake in Tamar, but no stake in Leviathan is upset about the agreement. Delek Drilling and Noble Energy have higher stakes in Leviathan than they do in Tamar. Isramco has asked IEC to freeze the agreement for two weeks, while it considers what steps it will take.
The price that IEC will pay for the Leviathan gas is expected to be $4.8 per thermal unit, similar to agreements that Leviathan has signed with private electricity producers and about 20% less than the $6.15 per thermal unit that IEC is paying the Tamar partners on its long-term agreement.
This means that the Tamar partners will be selling IEC 3 BCM of natural gas per year at the more expensive price while the Leviathan partners are selling 2 BCM per year at the cheaper price.
Published by Globes, Israel business news - en.globes.co.il - on April 7, 2019
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