Israel Electric Corp Boosts LNG Imports

Theoretically, Israel Electric Corp (IEC), the largest power generation company in Israel, imports LNG only as a backup for its natural gas needs. During the ordinary course of business IEC buys natural gas from Tamar Partnership for a high price of up to $6/mn Btu.

However, during the last few months LNG in the global spot market has become cheaper than Israeli gas. A few months ago IEC purchased three LNG shipments from the Caribbean at a price of $4.9/mn Btu, well below the local gas price. And according to The Marker, a business daily, IEC is looking at expanding LNG imports in order to get cheaper gas for its daily operations.

At the beginning of July IEC published an emergency tender, seeking one LNG cargo by the end of August, the height of the summer season when air conditioning is at peak use and Israeli natural gas is expected to be in short supply. Although IEC could have used either coal or fuel oil as a replacement in a few of its power generation units, the energy ministry has ordered the company to reduce its coal consumption by 15% this year compared with last year.

IEC CEO Ofer Bloch confirmed that LNG imports were no longer only as a backup for gas from Tamar.

According to IEC senior executives in 2021 the company is going to open the repricing clause in the sale and purchase agreement with Tamar partnership and demand a 25% reduction of the gas price which would make it even cheaper than the reported Trinidad purchases. The Tamar partnership's strong position in the market gives them leverage in these talks, but the oversupply of LNG gives IEC credible alternatives.

Ya'acov Zalel