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    Chevron Nixes Short-Term Israel Supply Contract


The US major is making its mark in Israel, having taken over the operator, Noble.

by: Ya'acov Zalel

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Chevron Nixes Short-Term Israel Supply Contract

US major Chevron is to cancel a short-term contract to supply gas to Israel Electricity Corp (IEC), it said October 9 in a stock market filing, stamping its authority on the way its new Israeli operations are run.

The news broke a day or two after its acquisition of Noble Energy, the operator and shareholder of Leviathan and Tamar gas fields, offshore Israel, and its partners immediately attacked it for abuse of its dominant position.

Chevron said the price was too low at $4-$4.4mn Btu. Instead Chevron advised IEC to purchase the gas from Tamar under the long term agreement at $6./mn Btu. However IEC can purchase gas from Leviathan, a gas field in which Chevron holds 40% against only 25% in Tamar, at a price of $4.80/mn Btu.

The short term agreement between Tamar and the IEC was signed by 53% of Tamar shareholders. Delek Drilling and Chevron did not sign up to the agreement and were given a 60-day period to do so. However, Chevron as the operator can prevent gas supply under this agreement.

Last month Israel's Attorney General said that Noble Energy, now Chevron, has the right to veto any deal in Tamar gas field until the end of 2021.

The other Tamar partners – Alon Gas, Tamar Petroleum and Isramco Negev 2 – wrote to the anti-trust regulator demanding intervention in order to stop what they claim is a monopolistic behavior by Chevron. "The only reason for the refusal [supplying gas from Tamar to IEC] is the conflict of interests in which Noble operates in light of its excess holdings in the Leviathan Reservoir," the companies wrote in a filing to the Tel Aviv Stock Exchange. "Therefore, according to the reference, the said conduct of Noble amounts to improper use of its power as a monopoly in the field of natural gas in Israel, contrary to the provisions of the Economic Competition Act, 1988. Therefore, as part of the referral, the anti-trust regulator was asked to exercise its powers under the Competition Act and to order Noble to supply gas immediately to the IEC in accordance with the addendum to the agreement."