Israel's IEC Demands Tamar Repricing
Israel Electric Corp. (IEC) announced June 27 that it is demanding an immediate reopening of its Tamar gas purchase contract to secure a price cut.
The demand, made by IEC chairman Iftach Ron-Tal, comes as Delek Group is preparing the flotation of 9.25% equity in the Tamar gas field as a new entity, Tamar Petroleum. The latter is valued at over $1.1bn and is preparing to raise up to $1.2bn in the Israeli financial market in equity and bonds.
A Delek Group spokeswoman said in response that Tamar will honor the contract and is confident that IEC will do so as well.
Calcalist, a business daily, reported that IEC has said that it will purchase 20% more gas from Tamar if prices would be reduced.
US firm Noble Energy bases Tamar Petroleum's valuation on the 2016 sale of a 3.5% stake in the Tamar field to Everest, a general partnership. Since then no deals were made, although both Noble and Delek Group are interested in selling down their holdings in Tamar. Delek has to complete the sale of all its shareholdings in Tamar by the end of 2021. Noble is interested in reducing its shareholding in Tamar Partnership to 25%, from 31.5%.
Tamar's valuation is based on the high gas prices it charges its Israeli customers: IEC pays about $6/mn Btu while private generators pay $4.70/mnBtu.
Despite the field's high profitability, so far no foreign investors, energy companies or investment funds have been willing to buy into Tamar.
However, this is consistent with foreign companies' lack of interest in the gas exploration licensing round offshore Israel. Last week the energy ministry announced on the extension of the round to November 2017, from its original close next month, as only one firm Energean was willing to bid.
Senior ministry officials at a conference in Tel Aviv June 27 tried to put a spin on what looks like a failed licensing round. "The licensing round ...is a leap forward in Israel's international standing ... Our image in the world has improved," said Michael Gordosh, the ministry's geophysics chief.
"The reason why it is hard to attract new players here is low oil prices at the moment but, after the development of Leviathan reservoir and with the opening of export channels, we can attract more players," said Bini Zomer, Noble's head of activities in Israel.
Ya'acov Zalel