Israel's Leviathan to Supply Gas to Paz Group

Israel's Leviathan partnership announced November 24 a new gas supply contract with Paz Group, a leading Israeli energy company. The gas is intended for use in operating the group's refinery in Ashdod. The contract is for the supply of 3 bn m³ over a 15-year period for $700 mn if all the gas quantity will be purchased.

Delek Drilling and Avner Oil Exploration Yossi Abu said: "Paz is an established partner in the implementation of the natural gas revolution in the Israeli economy, which enables the production of energy that is cleaner, cheaper, and more efficient. This agreement with Paz, along with the agreement to supply energy to the Jordanian Electrical Company (NEPCO), anchor the Leviathan Reservoir as a major player in the regional energy map, and promote the Israeli energy market as a whole.”

Although it is a minuscule contract, it might be one step closer to the final investment decision (FID) that Leviathan Partnership are expected to take by the years' end. So far Leviathan Partnership secured sales about 3.5 bn m/yr in four agreements. Three of the contracts are for the supply of small quantities of gas. The anchor contract was signed a few months ago with the Jordanian National Power Company (NEPCO) for a supply of 45 bn m³ over 15 years, worth $10bn.

Tamar rig

(Credit: Tamar partners)

The new contract contains a pay-or-take clause. Paz reserves an option to decrease the gas quantities it will purchase by 50% from the average purchased over the last three years before exercising that option. The contract is linked both to Brent and to power prices in Israel.

Last year Paz Group CEO, Yona Fogel, criticised the high price of natural gas in Israel and demanded lower gas prices for the domestic market. The existing producers, the Tamar partnership, is facing a class action, NGW reported November 24, on grounds that it exploited its monopoly position and over-charged its customers for gas.

Ya'acov Zalel