First Israeli Sales Contract for Energean
Greek upstream firm Energean has signed its first gas sales contract. with Dalia Power Energies and its subsidiary Or Power Energies. It is the first time in over a decade that Israeli gas is being sold by an entity other than the Delek/Avner/Noble group.
Energean said the contract covers 23bn m³ which would be about a third or a quarter of the gas reserves; but it did not say over what period, although the contract is to last "from the date natural gas flows in commercial volumes from Karish-Tanin to the purchasers, and conclude at the point when the purchasers' generation licenses need to be extended." Energean expects production to begin in 2021.
Dalia Power Energies Eitan Meir said: "Dalia and Or Energy are working to expand the volume of production offered by them while continuing to reduce the price of electricity. We are pleased to sign the agreement that expands the gas sources and the ability of the companies to offer their customers electricity at a competitive price. Competition in all segments of the electricity sector will serve the public and the Israeli economy."
Energean CEO Mathios Rigas said: "This is a significant day for the Israeli gas market. These are the first contracts for gas supplies from the Karish and Tanin fields signed with the Dalia group, the largest private power producer in Israel. The agreement is a substantial step towards bringing competition and cheaper energy to the market for the benefit of Israeli consumers and the country’s economy. Energean is in talks regarding further contracts with other potential customers in the market and is aiming to submit a Field Development Plan for the Karish and Tanin project in the next few weeks.”
The contract is contingent on a number of conditions, including the development of Tanin-Karish and the construction of the power plant that will consume the gas. Part of the gas will be supplied to the Tzafit Power Plant, which is already operational. In accordance with the decisions by the Israeli regulator, Dalia Power Energies is entitled to transfer 50% of the volumes it purchased for Tzafit power plant from the gas monopoly to Energean's new venture.
According to Israeli experts, the price range in the new contract is $ 4.10-$4.30/mn Btu, 30% lower than what Israel Electric Corp. (IEC) pays for gas purchased from Tamar Partnership.
Dalia Power Energies is a private electricity producer that now pays $4.70/mn Btu for gas from Tamar. The effect of today's announcement may be to pressure other private power producers to buy gas from Energean, which has said it needs annual sales of 3bn m³ in order to take a positive FID. Next month, Energean is expected to present the field's development plan to the energy ministry and FID is expected by year's end.
Energean Israel is expected to become a partnership with private equity group Kerogen Capital. It has agreed to invest an initial $50mn in Energean Israel subject to approval by the Israeli government, after which Kerogen will own a 50% interest in Energean Israel with Energean holding the balance.
Ya'acov Zalel