Palestinians to be first buyers of Israeli natural gas

PA’s electric company signs $1.2b, 20-year deal with Leviathan group, will produce power for West Bank in new $300m plant

Workers on the Israeli Tamar gas processing rig, 24 kilometers off the southern coast of Ashkelon, October 11, 2013 (photo crdit: Moshe Shai/Flash90)
Workers on the Israeli Tamar gas processing rig, 24 kilometers off the southern coast of Ashkelon, October 11, 2013 (photo crdit: Moshe Shai/Flash90)

The first buyer of natural gas from Israel’s largest gas field will be the Palestine Power Generation Company, which will purchase some $1.2 billion-worth of gas over 20 years, one of the major partners in the field announced on Sunday.

The Leviathan group will sell the PPGC, which supplies power to Palestinian areas in the West Bank, as much as 4.75 billion cubic meters of gas when the Leviathan reserve begins to yield in 2016 or 2017, the Delek Group said in a statement.

The Delek conglomerate owns 45.34 percent of the field, followed by the US-based Noble Energy with 39.66% and Ratio Oil Exploration’s 15%. Leviathan’s estimated reserves – 537 billion cubic meters – make it the largest offshore gas discovery in a decade.

The Palestinian company aims to build a $300 million power plant in the West Bank city of Jenin to produce electricity from the gas, Reuters reported.

“Economic cooperation such as the agreement signed today will lead to prosperity and growth and will contribute to the fostering of mutual respect and trust between Israelis and Palestinians and lay the foundations for peace,” Yitzhak Tshuva, the Delek Group’s controlling shareholder, was quoted as saying.

“We continue to work toward developing the Leviathan field as soon as possible,” Noble Energy’s vice president of Eastern Mediterranean operations, Lawson Freeman, said according to Reuters. He added that the group was hoping to sign more export agreements in the near future.

On Sunday night Channel 2 reported that Energy and Water Minister Silvan Shalom recently traveled to Jordan to promote a gas deal with the Hashemite Kingdom. The Delek Group has said that it plans to export some of the natural gas to Europe via pipelines to Jordan, Turkey and Egypt, as well as the Palestinian Authority.

In October, Israel’s High Court of Justice upheld a government decision to export 40% of the country’s offshore gas finds, rejecting demands that the matter be legislated in the Knesset. The petitioners, among whom were several MKs, argued that a decision with such critical import to Israel’s energy independence must be a matter of state law and not up to the cabinet alone.

The petition was filed in June after the government announced its intention to keep 60% of the gas supply for domestic use and allow the rest to be exported.

Under the current plan, Israel will receive 540 billion cubic meters of natural gas. Based on the country’s 2012 natural gas consumption of seven billion cubic meters, the allotment is expected to last for at least 25 years even with significant increases in domestic use.

The decision on gas exports grew out of conclusions published by a committee helmed by former Water and Energy Ministry director general Shaul Tzemach. The committee, formed in late 2011, had called on Israel to keep the first 450 billion cubic meters for domestic use, and allow the export of up to half of any additional amount extracted from the proven reserves.

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