Israeli LNG Imports to Undercut Local Gas Prices - Report
Israel Electric Corp. (IEC), the country's dominant electricity producer, has signed an contract with BP to import three LNG cargoes, according to The Marker, a business daily. The imports are intended to buttress supply from Israel's offshore Tamar gas field during peak hours in the summer and the winter.
The LNG will be shipped from the Caribbean, where BP is a partner in Trinidad's Atlantic LNG export facility, and sold to the IEC for a delivered price of $4.90/mn Btu, according to the paper.
Currently IEC, which is state-owned, purchases natural gas under long term agreements from Tamar Partnership, the gas monopoly in the Israeli market, for about $5.50/mn Btu. The move might be interpreted also as a pressure on the government and the gas monopoly to reduce prices.
It is not the first time that IEC has imported LNG. However, it is the first time that the prices will be lower than those of local natural gas. This is largely due to the collapse in global spot LNG prices, due to a surplus of supply relative to world demand. In the past, the IEC has lost hundreds of millions of dollars when it bought LNG cargoes and had to sell them later because of lower than expected gas demand.
Israel has one LNG import facility 10 km offshore at Hadera, opened in January 2013, with a nominal import capacity of 3.7mn metric tons/y (4.8bn m3/y), according to the International LNG Importers Group (GIIGNL). However in its first year of operation it imported just 0.4mn tons (0.55bn m3) -- supplied by BP. In 2015 the terminal handled only 0.12mn tons according to GIIGNL, mostly from Trinidad.
The import terminal is a Floating Storage and Regasification Unit (FSRU), on charter from US shipowner Excelerate Energy. Each LNG shipment is berthed alongside the FSRU and trans-ships its cargo to the latter, which then regasifies it and pipes the gas to shore. The FSRU also has LNG storage capacity of 138,000 m3 which therefore represents the upper limit on cargoes delivering to it.
During the National Energy Conference yesterday (Monday) in Tel Aviv, a few senior businessmen demanded reductions in natural gas prices for the local market, claiming that the monopoly's natural gas high prices are uncompetitive in the current global energy environment.
Avi Gabay, the environmental protection minister said in the conference that the monopoly's natural gas prices are prohibitive. He also said that the milliards of Shekels Israel hoped to get as revenues from its natural gas assets are just pipe dreams.