Israel Electric Corporation’s (IEC) board is expected to approve the $2.5 billion, 15-year natural gas deal with Eastern Mediterranean Gas (EMG) today. EMG will supply IEC with 1.7 billion cubic meters of natural gas a year over fifteen years, with a five-year option to extend. The IEC board is expected to approve the deal after a discussion today.
IEC’s approval of the deal, together with EMG’s corresponding approval, will make it EMG’s first commercial agreement to supply natural gas to Israel. Israel and Egypt signed a diplomatic agreement for the gas deliveries in June, proving political backing for the economic agreement and for agreements between Egyptian gas companies and EMG.
The EMG deal is extremely important for IEC, because it will slash production costs over the coming years. Electricity production by natural gas will save IEC at least $300 million a year over the contract period, for a total estimated saving of $3-4 billion.
IEC emphasizes that the natural gas price obtained in the deal is the lowest gas price in the world. IEC is reportedly paying $2.75 per British Thermal Unit (BTU). IEC’s board will not receive information about the price, although it is expected to approve the deal today, and will sign a confidentiality agreement.
Published by Globes [online], Israel business news - www.globes.co.il - on July 21, 2005