Israel Electric Company (IEC) is accusing Chevron to have halted its natural gas supplies from the offshore Tamar field, keeping the country’s energy market as a “hostage.”
The state-owned utility claims upon the completion of Noble Energy’s acquisition earlier this week, Chevron stopped the deliveries to IEC leaving Israel “with no gas supply.”
A Chevron spokesperson told Kallanish Energy on Thursday the company couldn’t comment on “sensitive commercial matters,” but confirmed Chevron “hasn’t discontinued operations from its facilities in Israel.”
According to Israeli media, Chevron told IEC in a letter it wouldn’t sell natural gas for less than $4 per million British thermal unit (MmBtu) as per an agreement reached with the rest of the Tamar partners. Such new agreement, not accepted by Chevron and Delek, would substitute the 2012 contract price of $6.30/MmBtu. If IEC didn’t accept the terms, gas supplies would be halted.
The IEC is now fighting its battle in court and via the Israeli Competition Authority, and said it could lose up to $50 million in the coming year due to Chevron vetoing a new contract.
To maintain uninterrupted supply to Israeli consumers, IEC said it had to purchase natural gas from the Leviathan field on a spot basis. It reportedly paid $4.97/MmBtu.
The utility has already bought 1.5 billion cubic meters (Bcm) of its committed to 1.75 Bcm volumes from Tamar this year. It intends to take the remaining 0.25 Bcm by year-end and purchase another 3 Bcm on the spot market, from both the Tamar or Leviathan fields.
Chevron said it looks forward to supporting Israel’s strategy to develop its energy resources for the benefit of the country. “These are very early days and as we continue to build relationships with all of our stakeholders in Israel, we are confident that they will see Chevron is committed to building trusted and mutually beneficial relationships,” it added.
The original long-term contract, signed with Noble Energy is valid until 2021. Chevron said it firmly believes “in the sanctity of contracts and will honor its commercial commitments.”
Alongside Delek, Chevron controls 85% of the rights to Leviathan and 47% to Tamar. The other partners in the Tamar field, which agreed to IEC’s new sought price, were Isramco, Dor Gas, Everest Infrastructures and Tamar Petroleum.
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