Israel Chemicals (TASE: ICL: NYSE: ICL) is arranging a backup in case Greek natural gas company fails to begin supplying it with gas on the agreed timetable in late 2020. Israel Chemicals today signed binding agreements for a supply of gas with the partners in the Tamar and Leviathan reservoirs, it reported to the Tel Aviv Stock Exchange (TASE) today. The average price in the deals signed is $5.30 per BTU, significantly less than the agreement signed by the partners with Egyptian company Dolphinus. The revenue from the agreements with the Tamar and Leviathan partners is likely to reach $130 million a year.
One of the two agreements signed is an extension of a previous agreement with the partners in Tamar, which is already supply gas to Israel Chemicals, from February this year until September 2020, when Leviathan will be developed. The agreement is for the supply of 0.38 BCM a year on an occasional basis.
The second, a new one with the Leviathan partners, is a backup for a continuous supply of gas to Israel Chemicals until gas starts flowing from the Karish and Tanin reservoirs, with an extension option. The agreement includes the supply of 0.38 BCM a year (with an option to increase the quantity of gas to 0.76 BCM a year) on a binding basis, including a take or pay mechanism for a minimum quantity.
The agreement will become effective when gas starts flowing from the Leviathan project, and is valid until September 2020. The agreement also states that if the flow of gas from the Karish and Tanin reservoirs is delayed, the agreement will be extended for six month periods until either gas starts flowing from Karish and Tanin or the end of 2025, whichever is earlier.
If the gas deal with Karish and Tanin is canceled, the Leviathan agreement will be automatically extended until the end of 2025.
The gas price in the deal is based on a price formula that includes a component linked to prices of a barrel of Brent oil and a component linked to the electricity rate in Israel set by the Public Utilities Authority (electricity). The volume of the agreement is likely to reach $130 million annually.
Published by Globes [online], Israel Business News - www.globes-online.com - on February 22, 2018
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