The State Comptroller is investigating how it happened that Israel Electric Corporation (IEC) bought surplus gas to the tune of billions of shekels, sources inform "Globes". The results of the audit will be published in a special report on "The consequences of the switch to gas for the power industry".
Last week, IEC published a prospectus in which it admits that it bought a surplus quantity of gas from the Tamar reserve costing $800 million (NIS 3 billion). The company said that half the surplus quantity was for 2018-2019 and the rest for 2020-2023. It added that the Tamar partnership had allowed it to extend the agreement with it if the surplus was not used.
Senior sources in the power industry now say that the estimate in IEC's prospectus is "optimistic" and that the surplus quantity of gas that IEC will be left with by the end of the agreement period is twice as great and that its cost amounts to as much as NIS 6 billion.
In 2012, IEC signed a gas supply contract with the Tamar partnership for up to 99 BCM (billion cubic meters) of gas. IEC undertook to buy a minimum annual quantity even if it did not consume all of it (take or pay TOP). It was stipulated that the TOP would be 3.5 BCM for five years, after which it would fall to 2.5 BCM.
According to an internal IEC document that reached "Globes", in 2013-2015 IEC consumed 1.56 BCM more than the TOP, a quantity that it can offset against the deficit that will arise in the coming years. In the same document, IEC estimates that it will end 2023 with a "gas deficit" of 3.53 BCM, that is, it will consume 3.53 BCM of gas less than the minimum it committed to pay for. This quantity explains the surplus payment of $800 million.
"The company's demand projection is fantasy," a senior power industry source said today, "IEC assumed that from 2022 its gas consumption would rise each year, but that is not consistent with the entry into the market of private power producers, cogeneration producers, and the integration of renewable energy producers."
Published by Globes [online], Israel business news - www.globes-online.com - on December 3, 2015
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