The Israel Electric Company directorate is expected to approve an upgrade of its business relationship with Egypt’s gas company – at the expense of Israel’s largest gas company, Delek Energy.
The Egyptian concern, known as EMG, comprises the Egyptian government, Arab businessmen, Yossi Meiman of Israel and Sam Zell of the United States. It signed a contract with the Electric Company (IEE) in 2005 to supply natural gas to Israel. In 2008, EMG became Israel’s largest gas supplier – and the agreement expected to be approved tomorrow will give it an even larger share.
Delek says that IEE is giving in to Egyptian blackmail and is involving political considerations in its decision.
In a sharp letter to the IEE directorate, which is to discuss and vote on the proposed deal with EMG on Thursday, Delek chairman Yitzchak Tshuva writes, “IEE is discriminating against natural gas in Israel in favor of the Egyptian supply, and giving into Egyptian suppliers’ blackmail, even though they have violated its agreements with you.”
It was reported earlier this month that Israel’s gas deposits at the Tamar-1 drilling site are 16 percent more than was estimated just a month before – which, in turn, were 30 percent higher than had been previously thought. It is now felt that some 207 billion cubic meters of gas are drillable at Tamar, located 80 kilometers west of Haifa. Gas is expected to start flowing into Israel from Tamar three years from now.
“Delek Energy, a partner in the Yam Thetis gas company, has supplied natural gas to IEE since 2004 without default,” Tshuva wrote, “while EMG has repeatedly violated its agreement with IEE.” IEE has often accused the Egyptian consortium of providing less gas, of lower quality, than it promised.
Delek asked that it be allowed to participate in the directorate’s meeting on Thursday in order to present its case and “information that the directorate must have before making its decision.”
The Electric Company has already released a response, rejecting all the Yam Thetis-Delek charges.
The EMG-IEE agreement of 2005 stipulated that EMG would provide 1.7 billion cubic meters of gas annually for 15 years, with an option to increase the supply by 25 percent. The price per cm was approximately $2.70, and the price under the new agreement is expected to rise to over $4.00.