Israel Electric Corp. (IEC) announced today that it has signed an amendment to its gas supply contract with the Tamar Partners, with a 29% discount on the previous price paid. The new price will be $4.5 per million British thermal units (mmBtu), linked to the US consumer price index in a range of between 2.25% and 3.25%.
The original contract between the IEC and the Tamar Partners signed in 2012 allowed for the price of gas to be amended in 2021 and 2024. The contract allowed for the price to be revised upwards or downwards by 25% and by 10% upwards or downwards in 2024. IEC and the Tamar Partners agreed to postpone the next price amendment from July 2024 to December 2024.
As the price of natural gas has fallen steeply since the original contract was signed, IEC was demanding at least the full cut of 25%, and was able to achieve a 29% discount by committing to buy an additional 16 billion cubic meters (BCM) from the Tamar Partners at a price of a 'little under' $4 mmBtu (the exact price was not given).
The contract signed by IEC in 2012 has come in for harsh criticism because of several unusual clauses, primarily linking the price to the US CPI, rather than oil, which is the norm. This pushed the price up to $6.36 per mmBtu by July 2021. In addition, regardless of the US CPI, the IEC agreed to a 1% price rise every year for the first even years, followed by a 1% price fall every year for seven years. The contract was even criticized by the State Comptroller.
IEC CEO Ofer Bloch said, "The new agreement that we are presenting today is good news for the public. The price of gas that the IEC will pay to supply its overall production mix provides stability and a good price reflecting the results of determined and quality negotiations."
The Tamar Partners are: Delek Drilling is selling its 22% stake to Mubadala Petroleum, Isramco (28.75%), Chevron Mediterranean (25%), Tamar Petroleum (16.75%), Dor Gas Exploration (4%), and Everest (3.5%).
Chevron Eastern Mediterranean business unit managing director Jeff Ewing said, "The agreement reached between the respective commercial parties is yet another example of Chevron`s commitment to building trusted and mutually beneficial relationships through collaboration with communities, governments, customers, suppliers, and other business partners."
Published by Globes, Israel business news - en.globes.co.il - on January 24, 2022.
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