Because the coronavirus crisis is pushing down global liquefied natural gas (LNG) prices, Israel Electric Corporation (IEC) (TASE: ELEC.B22) is buying up LNG at the lowest ever price. Sources inform "Globes" that IEC is buying LNG on the spot market at an average price of $3.50 per BTU, 45% lower than the price paid by the company to owners of the Tamar natural gas reservoir. Every LNG cargo purchased at these prices lowers the electricity rate by 0.1-0.2%, and IEC is planning to buy more such cargoes.
Late last week, IEC's management reported that it had purchased two LNG cargoes that were on the way to China, and were left without buyers. One cargo was purchased for $3.39 per BTU and the other for $3.61 per BTU. IEC is obligated to buy 1.7 BCM of gas from Tamar this year, but is entitled to buy the rest of the gas it needs, amounting to 2 BCM, from other sources. The Leviathan reservoir offered IEC gas at $4.79 per BTU. IEC chairman Maj. Gen. Yiftah Ron Tal (res.) told "Globes" that the company would try to buy additional cargoes at similar prices in the coming days. He said, "We are buying these cargoes at the lowest price in the world for LNG, and saving tens of millions of dollars." The marine facility enabling IEC to buy LNG from anywhere in the world has an annual capacity of 2.5 BCM.
LNG is natural gas cooled to minus 160 degrees. In a liquid state, it can be transported by sea. China is the world's largest importer of LNG. Early this month, a number of LNG customers in China announced the cancellation of all of their planned purchases of LNG in February and March, citing a force majeure clause in their contracts. Behind the announcement lies a steep drop in demand for electricity in China caused by the shutting down of factories due to the coronavirus. The announcement left many LNG shipments on their way to China with no buyers. LNG prices have now fallen to an all-time low.
As reported by "Globes," the global coronavirus crisis has enabled Israel to import LNG and receive it through an LNG buoy off the Hadera coast. A special vessel anchored next to the buoy reconverts the LNG into gas, and streams the gas into the national gas pipeline, from which it can be streamed to power stations and used to produce electricity. The marine facility near Hadera can process 2.5 BCM of LNG, more than two thirds of the total amount of gas consumed by IEC.
The IEC board of directors instructed company management to look for similar deals. Since such deals are conducted on the spot market, the offers are valid for only 24 hours. The board of directors accordingly gave management extraordinary authorization to close deals in an abbreviated proceeding.
Published by Globes, Israel business news - en.globes.co.il - on February 23, 2020
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