The Israel Electric Corporation (IEC) (TASE: ELEC.B22) board of directors this evening approved a $8 billion agreement to buy natural gas from the Tamar partners. The agreement concludes two years of negotiations and as "Globes" recently revealed the contract was expected to be signed before the end of this month.
The Tamar partners are Noble Energy Inc. (NYSE: NBL) (36%), Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) (28.75%) Delek Group Ltd. (TASE: DLEKG) units Delek Drilling LP (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L) (15% each), and Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) (4%).
The agreement is over 15 years and the size of the deal is likely to reach $8 billion, which represents $5 per thermal unit. The price will be revised in mid-2013 when gas from the Tamar field starts flowing.
IEC chairman Yiftach Ron-Tal said, "The agreement expresses the gas revolution in which we are in throes of and the State of Israel's ability to achieve full energy independence. This is perhaps the largest agreement ever signed in the Israeli economy. This agreement promises stability in gas supply."
Negotiations dragged on because the IEC refused to withdraw its demand to receive the lowest possible price and insisted that signing any final agreement remained dependent on that. However, this obstacle was removed when Israel Antitrust Authority head David Gilo warned that such a restrictive arrangement could constitute a criminal offence.
In addition, the agreement states that if supervision is imposed on the price of natural gas then it will also apply to the price in the agreement with the Tamar partners.
Until 48 hours ago, the agreement was on the brink of collapse over the lowest price clause, because the IEC feared that the Tamar partners would subsequently agree a lower price with private electricity producers, to block future competition.
Delek Group and Alon needed an agreement with the IEC in order to receive bank financing to develop the Tamar gas field.
Published by Globes, Israel business news - www.globes-online.com - on December 15, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011