IEC extends LNG floating tanker contract

IEC Israel Electric Company
IEC Israel Electric Company

Liquefied natural gas is an emergency backup for Israel's gas sector.

The Public Utilities Authority (Electricity) has approved the continued use by Israel Electric Corporation (IEC) (TASE: ELEC.B22) of the liquefied natural gas (LNG) floating container and the purchase of LNG from the gasification tanker off the Hadera coast until 2019, sources inform "Globes."

The demand for LNG imports as a backup in emergences stems from the shortage of gas created in 2011-2012 after gas stopped flowing from Egypt and the Yam Tethys reservoir ran dry. In pursuit of this, a marine LNG container was established 10 kilometers west of Hadera, and the services of a US gasification tanker were leased.

The lease period for the tanker terminates in October 2017, and IEC asked the Public Utilities Authority (Electricity) several months ago to recognize the cost of leasing it for two additional years, explaining that the tanker was an "insurance policy" for the Israeli gas sector.

60% of electricity in Israel is produced from natural gas, and there are already more than a few hours when the flow of gas from the Tamar reservoir is insufficient. At the same time, gas sector sources are criticizing the decision to extend the lease for the US tanker, saying that it is not worthwhile. They say that the project has cost $700 million, with almost no use being made of the LNG. In 2013, IEC purchased 10 LNG containers from British Petroleum at a cost of $50 million per container, but consumed only half of the LNG this year, with the rest being sold on the international market at a $24 million loss. IEC consumed only 0.06 BCM of LNG in 2014.

The Public Utilities Authority (Electricity) asserts that in principle, its approval is only conditional, subject to the final lease, stating, "The company must show the Public Utilities Authority (Electricity) the terms for leasing the tanker as soon as they have been formulated for the purpose of approving final rate recognition of the leasing costs."

IEC stated, "According to current estimates, by the end of the lease period (October 2017), the connecting of no additional gas field to the economy other than Tamar is expected. The Ministry of National Infrastructure, Energy, and Water Resources Electricity Administration therefore issued instructions to extend the lease by two years, and to operate the tanker on a survival mode that will facilitate an immediate flow of LNG to the productions system, if necessary. The Public Utilities Authority (Electricity) council decided this week that the lease would be approved under cost control. At the same time, the survivability policy has not yet been approved."

Published by Globes [online], Israel business news - - on November 3, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

IEC Israel Electric Company
IEC Israel Electric Company
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