$1.3 billion of natural gas pledged for two new Israeli power plants

The consortium developing Israel’s massive offshore Leviathan natural gas field has signed its first deal to supply gas, contracting with two private companies for $1.3 billion.

Edeltech Group and its Turkish partner, Zorlu Enerji, have purchased six billion cubic meters of gas, to be supplied over 18 years, to build two new power stations in Israel, it was reported on Sunday.

The gas will be used to fuel the Tamar station, to be built next to the Haifa Chemicals plant at Mishor Rotem in the Negev Desert, at an estimated cost of $250 million. Solad Energy, earmarked for a site next to the CHS plant in Ashdod, will be built at an estimated price of some $125 million.

Edeltech, Israel’s largest private power producer, owned by the Edelsburg family, has already partnered with Zorlu Enerji to build the Dorad Energy plant in Ashkelon, along with the Ashdod Energy and Ramat Negev Energy stations.

Taken together, the five power stations are slated to produce 10% of the power demand in the Israeli economy, the Globes newspaper reported Sunday.

“We continue to work with all our might to make progress on developing the Leviathan reservoir and to bring the gas to the Israeli economy and its industry,” Delek Drilling CEO Yossi Abu said. “This deal is a harbinger of things to come, and we intend to further promote sales contracts with customers in Israel, Jordan, Egypt, and Turkey,” Globes quoted him saying.

The exact quantity of gas purchased by Edeltech and its Turkish partner will be adjusted according to the size of the plants the partners eventually build and the price will be linked to production costs set by the Israeli Electricity Market Regulatory Authority.

The Leviathan field, controlled by Israel’s Delek Group and Texas-based Noble Energy, is thought to contain some 22 trillion cubic feet of natural gas and is expected to transform the country into a regional energy powerhouse.

The government signed an agreement in December to allow the consortium to start work on extracting gas from the Leviathan field, after months of argument and public protest.

While Prime Minister Benjamin Netanyahu has argued that the agreement opens the way for hundreds of billions of shekels to stream into state coffers, critics fear regulations favor the companies over Israeli consumers.