View of an Israeli Leviathan gas field processing rig off the Israeli coast. (Flash90)
The dispute could affect plans for two major Israeli gas-fired power stations at a time when Israel is expanding and modernizing its electricity generation capacity.
By Pesach Benson, TPS
NewMed Energy and Ratio Energies have moved to terminate a $6.7 billion natural gas supply agreement with Israeli power producer Dalia Energy, putting a major planned addition to Israel’s electricity generation capacity in question.
The agreement, signed in May, was intended to supply gas from Israel’s Leviathan reservoir to two new power stations: the 850-megawatt Dalia 2 plant at Tel Tzafit and the 850-megawatt Avshal plant at the site of the former Eshkol power station in Ashdod.
The long-term agreement was to cover gas supplies from 2030 through 2050 at $4.70 per million British thermal units.
The price was scheduled to be reopened for negotiation in 2041, with a possible adjustment of up to 10% in either direction.
NewMed and Ratio said the agreement was terminated because conditions precedent were not fulfilled within the deadlines set in the contract.
The partners pointed to the lack of approval from Israel’s Competition Authority as a key outstanding condition.
Dalia Energy disputes the termination.
The company notified the Tel Aviv Stock Exchange that it was surprised by the decision and considers the cancellation invalid, including because the notice was not issued in accordance with the agreement.
Dalia said discussions are still underway with the Competition Authority over an exemption application submitted by the Leviathan partners and that the regulator has not yet issued a final decision.
The dispute could affect plans for two major Israeli gas-fired power stations at a time when Israel is expanding and modernizing its electricity generation capacity.
It also puts one of the country’s largest planned long-term gas supply agreements in doubt.
NewMed holds 45.34% of Leviathan, Ratio 15% and Chevron Mediterranean Limited 39.66%.
Ratio said the cancellation of the agreement constitutes a material transaction that could affect its future cash flows from the Israeli reservoir.
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