The heads of Israel Corporation (TASE: ILCO) unit Oil Refineries Ltd. (TASE:ORL) have asked the director of the Antitrust Authority that they should receive an assured quantity of gas from the "Tamar" reserve, even if this comes at the expense of other customers with gas supply contracts from the reserve.
Israel Corp. does not yet have a signed agreement to buy gas from "Tamar", although it is negotiating such an agreement. Sources inform "Globes" that the company's senior management met Antitrust Authority director Prof. David Gilo and presented their stance on the latest gas agreements and their impact on the gas industry and on the private power generation industry. The meting took place against the background of Gilo's decision to review all the gas supply agreements with "Tamar" in order to examine whether changes are required in them to avoid harm to competition in the gas supply industry.
Energy industry sources expressed great disappointment at the delay in the signing of the agreements, and said that the uncertainty that had continued for two years threatened the very existence of the private power production industry in Israel. The Antitrust Authority director's bureau said that the gas market as a whole was under review, and that therefore no further information could be disclosed at this stage. Gilo's review began after the cessation of gas supplies from Egypt, and after it became clear that the "Tamar" reserve would be the only one supplying gas in the Israeli economy from mid-2013 until at least 2014.
The background to Israel Corp.'s demand is the fact that the capacity of the gas pipeline from "Tamar" will not be adequate to the total demand for gas in Israel. At present, gas is assured only for "Tamar's" customers, among them Israel Electric Corporation and private power venture Dalia Power Energies. As a result, gas consumers that do not yet have agreements, including Israel Corp. and private power venture Dorad, are liable to be harmed.
At the end of 2010, Israel Corp. signed a purchase agreement for Egyptian gas with EMG for the power plant it is constructing on the Rotem plain in the Negev via OPC, and for Dead Sea Works and Oil Refineries. The group's gas needs are estimated at about two billion cubic meters a year. Now, with the cancellation of the agreement between EMG and the Egyptian government gas company, Israel Corp. is in effect left without a long-term gas supply contract. The problem is especially acute for the OPC power plant, which is duet to start operating within less than a year. An alternative solution could be imported gas, which will start to reach Israel at the end of this year via a buoy stationed offshore from the Hadera power station.
Another solution could be expansion of the capacity of the "Tamar" pipeline in the second stage of the field's development. However, as reported in "Globes", it has not yet been decided how stage B will be developed, because of a dispute between the Natural Gas Authority at the Ministry of Energy and Water Resources, which is demanding construction of an additional pipeline to Ashkelon, and the "Tamar" partnerships, which are prepared to expand the capacity of the existing pipeline. The partnerships claim that they cannot finance development of stage B until the gas supply agreements are signed. However, as mentioned, these await review by the Antitrust Authority.
Published by Globes [online], Israel business news - www.globes-online.com - on May 2, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012