Regulator orders Delek, Chevron to end IEC exclusivity deal

Leviathan rig Photo: Albatross

Despite being informed of the exclusivity violation 10 months ago, the Israel Antitrust Authority has waited until several weeks before Leviathan's contract with the IEC ends.

The Israel Competition Authority has sent a letter to Delek Drilling and Noble Energy (now owned by Chevron) claiming that the two companies, which own the Leviathan gas reservoir (in partnership with Ratio) violated the exclusivity clause in the gas agreement signed with the Israeli government, as part of the gas sale agreement it signed with the Israel Electric Corp. (IEC) in 2019.

In the letter, the Israel Competition Authority is demanding that the exclusivity clause in the agreement be immediately cancelled. The importance of the letter is mention of the violation rather than the immediate practical aspects because the agreement between the Leviathan partners and the IEC ends at the end of this month. The Israel Competition Authority did not say what it plans to do about the matter and is keeping all its options open.

The alleged violation concerns the 18-month gas supply agreement signed in June 2019 between the Leviathan partners and the IEC. Gas began flowing from Leviathan on December 31, 2019 and the agreement expires on June 30. Under the terms of the agreement, according to a report in March, the IEC paid the Leviathan partners more than NIS 1 billion for gas in 2020. Delek Drilling's financial report said that through to 31.12.2020 Leviathan supplied IEC with 2.4 BCM of gas for $404.8 million.

The Israel Competition Authority now appears to be saying that the contract was preventing the IEC options for obtaining lower prices elsewhere. According to the Israel Competition Authority, clause 1B gave the Leviathan partners exclusivity in sales of gas, and in so doing violating clause 22(A) of Appendix A in the gas agreement set out by the Israeli government. This clause prohibits the Leviathan partners from restricting the purchase of natural gas from other gas suppliers.

Lobby 99 VP Merav David said, "We urgently turned to the antitrust regular 10 months ago after we found that the Leviathan partners were pressuring the government to prevent the imports of cheap gas following the collapse of liquefied gas prices in the world during the Covid-19 crisis."

She added, "It's time that the regulators began working for the benefit of the public and resolutely to lower the price of gas and with it the price of electricity and not serve in their decisions the interests of the gas monopoly."

Published by Globes, Israel business news - en.globes.co.il - on June 8, 2021

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

Leviathan rig Photo: Albatross
Leviathan rig Photo: Albatross
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