Israel Electric Corporation (IEC) (TASE: ELEC.B22) CEO Amos Lasker told "Globes" today that he has no idea when natural gas deliveries from Egypt will resume. "All we get are official assessments. We were told that the flow of gas to us will resume together with flow of gas to Jordan, but I understand that only the pipeline to Jordan was affected, and the pipeline to us is intact."
Sources inform ''Globes'' that Jordan is preparing for a two-month halt in natural gas deliveries, even as East Mediterranean Gas Co. (EMG) has announced that deliveries to Israel will resume within a week, following an explosion and fire at a gas metering station on the El Arish-Ashkelon natural gas pipeline.
Lasker declined to say how much electricity rates will rise in the event of a prolonged halt in Egyptian gas deliveries. A rate hike is likely because IEC will have to use heavy industrial oil and coal to generate electricity, instead of the cheaper natural gas.
Lasker said, "Even if we're talking about a week or two, it will definitely have an effect, albeit minimal. If we're talking about months, we’ll have to use more expensive fuels - diesel and heavy industrial oil - in addition to coal and natural gas from Yam Tethys (owned by Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc. (NYSE: NBL), which supplies gas from its fields offshore from Ashkelon). Assuming for the sake of an example that we buy 10% of fuel as diesel and heavy industrial oil at a cost ten times that of coal and natural gas - anyone can do the math."
"Globes": What do you advise the government to do now?
Lasker: "To open the Noa reservoir, ignore all the economic arguments with the Tamar partners, and expedite the reservoir's development as fast as possible, reopen talks over Gaza Marine reservoir (offshore from Gaza), ensure that natural gas is never used to generate more than 45% of electricity production, and build the Ashkelon D power station."
The explosion on the El Arish pipeline occurred on Saturday morning at the metering station where the pipeline splits to Israel and to Jordan. The resulting fire rose dozens of meters into the air. The fire damaged the pipeline to Jordan, and the heat of the fire damaged the entire network, causing EMG to shut it down.
Sources inform ''Globes'' that electricity rates were due to fall, because of the increased use of natural gas instead of more expensive fuels. The rates are revised retroactively for one year at an end-of-year public hearing, which is due to begin tomorrow. The IEC, backed by the Ministry of Natural Infrastructures, wants an immediate 16% hike in electricity rates, in order to improve the company's shaky financial condition. The reduction in electricity rates will be offset by a hike in the excise on coal, decided on by the Ministry of Finance. IEC uses coal to generate half of its electricity.
The Ministry of Natural Infrastructures is considering building a natural gas terminal for imports. Last night, Minister of National Infrastructures Uzi Landau held a meeting in his office to assess the situation, during which an option to build a liquefied natural gas (LNG) facility, in order to allow LNG imports, was discussed. IEC is the biggest backer of this plan, as it fears becoming dependent on a single gas supplier - the Tamar partners (including Delek and Noble Energy), and wants to open the natural gas market to imports.
Published by Globes [online], Israel business news - www.globes-online.com - on February 6, 2011
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