Israel Electric Corporation (IEC) (TASE: ELEC.B22) is converting its Orot Rabin Power Station in Hadera to natural gas in 2014. The company yesterday published an international request for proposals (RFP) for supply of natural gas to four of the power plants units. Two generators will continue using coal.
The tender is worth an estimated $7 billion, on the basis of gas procurement contract between IEC and the owners of the Tamar gas field.
The decision to switch to gas is a major policy shift in IEC's fuel consumption. Until now the utility has limited the use of natural gas to the production of 40% of its capacity. Following the publication of the RFP, IEC's coal purchases will be cut by a third.
The terms of the RFP state that, beginning in July 2014, IEC will buy 2.24 billion cubic meters of natural gas a year over 15 years. IEC wants the price of natural gas to be linked to the price of coal, although the market norm is to link the price of gas to the price oil or refined oil products.
Energy sector sources criticize this demand, saying that natural gas is a much cleaner fuel than coal. "It's like linking the price of an apartment in Herzliya Pituah to apartment prices in Afula," said one source.
Possible bidders in the RFP include Egypt's East Mediterranean Gas Co. (EMG), in which Israeli businessman Yosef Maiman is a partner; the Tamar owners, Noble Energy Inc. (NYSE: NBL), Delek Group Ltd. (TASE: DLEKG), Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), and Dor Alon Energy Exploration Ltd.; and the consortium of BG Group plc (NYSE; LSE: BG), the Palestinian Investment Fund, and Consolidated Contractors Company (CCC), owned by Lebanon’s Khoury family, from the Marin gas field off Gaza.
Published by Globes [online], Israel business news - www.globes-online.com - on July 14, 2010
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