Israel gears up for gas

11 January 2002

Israel has made a major commitment to gas for its future energy needs, unveiling plans for an extensive supply network linking offshore natural gas reserves to combined-cycle power stations on the Mediterranean coast. Gas supplies will initially be sourced from offshore Israeli fields, but these will need to be supplemented by supplies from other sources in the region.

State-owned Israel Electric Corporation (IEC) has concluded commercial details of a gas supply agreement with the Yam Thetisconsortium, which comprises Avner Oil Exploration, Delek Drillingand Granite Hacarmel Investments, all of Israel, and the US' Samedian Mediterranean. Under the agreement, which is expected to be signed by mid February, Yam Thetis will supply 1,600 million cubic metres a year of gas to IEC on a take-or-pay basis.

The estimated $4,000 million deal will provide IEC with about 50 per cent of its gas needs over a 15-year period. The company has selected Egyptian/Israeli joint venture East Mediterranean Gasto be one of the primary suppliers of its remaining gas requirements, but as yet no agreement between the two companies has been concluded. The UK's BG Groupis also in discussions with IEC about the supply of gas from its offshore Mediterranean fields, which include the Gaza concession in Palestinian Authority territory (MEED 30:11:01; 23:3:01).

IEC says a consortium of Belgium's Tractebeland Africa Israel Investments and Paz OilCompany, both Israeli, submitted the sole bid on 27 December for the contract to build a $400 million pipeline system to convey the gas from a terminal at Ashkalon to power stations along the Israeli coastline. IEC is expected to award the contract in mid February and work on the 150-kilometre pipeline will be completed in December 2003. PricewaterhouseCoopersof the UK is the project consultant.

Gas supplied by Yam Thetis will replace the fuel oil used by three existing power stations in Ashdod, and will fuel three new combined-cycle plants supplied by Siemens Power Generationof Germany. Under a Eur 300 million ($268 million) agreement signed in late December, Siemens will build two 370-MW plants near the town of Lod and another near Haifa. All three plants will be completed in time for the first deliveries of gas in early 2004. Industry sources say the government is in the final stages of negotiations with GE Power Systems of the US for construction of two additional 370-MW plants.

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