Israel to Extend Lease Contact on LNG Regasification Ship

Israel Electric Company (IEC) will extend to contract for a regasification ship for a further 2 years when the current contract expires in October 2017. The ship was hired from US based Excelerate Energy for up to $450 million for 5 years.

The ship is anchored to Israel's only offshore LNG terminal. The contract extension had been approved by Israel's Electricity Authority following the expected delay, by at least 3 years, from 2017 to 2020, in operating a pipeline from either Leviathan field or Tamar field to the Israeli shore.

Currently about 60% of Israel's electricity is generated by natural gas and the regasification ship provides the only emergency storage available to Israeli customers. The terminal is capable of 600 MMcf/d delivery rate.

According to media reports, experts claim that keeping the ship in a standby is economically ineffectual,  having so far cost IEC $700 million. During 2013 IEC purchased 10 LNG cargoes for $500 million, and then sold half of the cargoes in the spot market and posted a loss of $24 million on that trade. In 2014, due to the production efficiency of Tamar field, IEC consumed only 0.06 bcm LNG.

However the regasification ship is currently the only alternative of natural gas supply in case of failure in either the production or the pipeline which delivers gas to the shore. This will remain the situation for at least the next 4-5 years.