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| Energean CEO Mathios Rigas. Credit Ofer Vaknin |
Greek company proposes bargain rate to secure key contract for its Karish and Tanin fields in Israel, which it purchased last year.
Energean Oil & Gas, the Greek company that bought Israel’s Karish and Tanin offshore natural-gas fields last year, has offered to sell natural gas to Israel Electric Corporation for around 25% less than IEC is currently paying, beginning in 2021, TheMarker has learned.
The offer is for the sale of about 1 billion cubic meters a year more than IEC is already contracted to buy from the Tamar field. That field is controlled by Noble Energy, Delek Group and Isramco.
The price would be from $4.50 to $4.60 per million British thermal units, compared to the $6 IEC will likely have to pay in 2021 based on the formula in the 2012 contract it signed with the Tamar partners, TheMarker has learned.
Energean’s offer would be a huge savings for IEC, a state-owned company that generates about 90% of Israel’s electricity. The terms of its 2012 contract, which were controversial even when it was signed, require IEC to pay higher prices for the gas it uses to power its generators than private producers are paying for their gas.
Today IEC pays $58.32 per mmbtu. A controversial mechanism linking the price to the U.S. inflation rate plus 1% ensures that the price will continue to rise.
But under the take-or-pay terms of the 15-year contract with the Tamar partners, IEC is committed to buying less gas each year. By 2021, when Energean’s offer would go into effect, the quota would be just 3 billion cubic meters, low enough for the utility to need to buy another 0.5 BCM to 1.5 BCM annually.
Energean executives have made a case to IEC officials that the savings they offer are so great that even if the utility ended up buying more gas from 2021 than it needed between the Tamar and Energean commitments it would not lose money.
The Greek company which is led by CEO Mathios Rigas, agreed in August to buy Tanin and Karish, which jointly contain between 60 BCM and 80 BCM, for $148.5 million from the Delek Group. Delek had been ordered to divest the fields to create more competition in the domestic gas markets.
Energean said in December it planned to spend $1 billion developing them, but in order to get the financing it has to lock in contracts to sell some 3 BCM of gas annually. The IEC contract would be the anchor deal.
Avi Bar-Eli is a Haaretz Contributor
SOURCE
The Greek company which is led by CEO Mathios Rigas, agreed in August to buy Tanin and Karish, which jointly contain between 60 BCM and 80 BCM, for $148.5 million from the Delek Group. Delek had been ordered to divest the fields to create more competition in the domestic gas markets.
Energean said in December it planned to spend $1 billion developing them, but in order to get the financing it has to lock in contracts to sell some 3 BCM of gas annually. The IEC contract would be the anchor deal.
Avi Bar-Eli is a Haaretz Contributor
SOURCE
