Energean Oil & Gas Group signed contracts to supply private Israeli power plants with natural gas, the first deals to compete with the partners who dominate the country’s energy industry.
Greece’s Energean will supply as much as 23 billion cubic meters of natural gas from the Karish and Tanin fields offshore Israel to Dalia Power Energies Ltd. and Or Power Energies Ltd., according to an emailed statement Sunday. The cost will be linked to the Israeli electricity market and underpinned by a floor price.
Energean has said it will sell to the Israeli market for less than what Israel Electric Corp. — the state-run utility and biggest supplier of power — pays to the partners in Tamar, Israel’s second-largest natural gas reservoir. Israel Electric paid on average $5.22 per thousand cubic feet of gas last year, according to Noble Energy Inc.’s annual report. Noble owns a major stake in and operates the Tamar field.
“The agreement is a substantial step toward bringing competition and cheaper energy to the market,” Energean Chief Executive Officer Mathios Rigas said in the statement. Energean is negotiating further contracts in the Israeli market and plans to submit a development plan for the Karish and Tanin field “in the next few weeks,” he added.
Establishing competition was the Israeli government’s main goal when it revised its regulatory policies governing the natural gas industry in 2015. Noble and Israel’s Delek Group Ltd. were forced to sell the smaller Karish and Tanin fields and reduce their holdings in Tamar in order to develop Leviathan, Israel’s largest gas reserve. The Leviathan partners have already signed four contracts with local customers and may sell more.
Energean bought Karish and Tanin from Delek and Noble for about $150 million and future royalties last year. The Greek explorer said it will invest more than $1 billion in development over the next few years, with the aim of pumping gas to clients by 2020.
The two fields hold about 68 billion cubic meters of natural gas, according to the statement. That’s about one-fifth the size of Tamar.