Chinese surprise: Corona virus may lower electricity prices in Israel

Due to severe damage to China's economic activity as a result of the Corona virus, the country announced the cessation of liquid natural gas purchases - which is expected to bring down gas prices that are already at a low

Electricity consumers in Israel may benefit from the collapse of liquid gas prices in the world, as the corona epidemic spreads. Globes has learned that the board of directors of the electricity company approved at its recent meeting to purchase liquid gas chargers at short notice - with the intention of taking advantage of the unprecedented slump in prices.

Last week, China's government energy companies announced the operation of "Force Majeure" and cessation of liquefied natural gas (LNG) purchases, due to a dramatic and unexpected drop in natural gas demand in the world's second-largest economy. The reason for the decline is the outbreak of the Corona virus, which causes severe damage China's economic activity The announcement is expected to drop liquefied natural gas prices for immediate supply, having already hit an all-time low due to an expected winter in Asia. In the US, where gas production is rising year by year, large surpluses of gas have lowered prices. Henry Hub at least $ 2 per unit of heat. Now, following the cessation of shipments to China, further declines are expected and gas shipments already out on the way to China will be left without a buyer - creating opportunities to purchase the liquid gas at particularly low prices.

"Globes" learned that even before the effects of the krona, an electric company had managed to exploit natural gas low prices and agreed to purchase two liquid gas chargers for supply in August 2020 at an estimated price of $ 3.8, but it could purchase additional chargers and even lower prices. Those who might lose out are local gas suppliers and most of all, a whale reservoir that offers the electric company gas for $ 4.79.

The electricity company is currently paying $ 6.3 per unit of heat for the gas it purchases from the Tamar reservoir, in accordance with a 2012 agreement. Connecting a whale reservoir to the Israeli coast last December allowed the IEC to reduce 75% of the precious gas it buys from a transducer. The electric company received an offer from the whale to purchase the amount vacated for $ 4.79 per unit of heat. That move alone resulted in a 3.3% reduction in the electricity tariff in 2020.

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Rabin lights power station in Hadera (Photo: Reuters)

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But the electricity company has the option of reducing the price of electricity even more - if you buy liquid natural gas, at the expense of the amount it intends to purchase from their whale. The possibility of importing liquefied natural gas into Israel was created thanks to a marine buoy that allows liquefied natural gas (LNG) to be imported into Israel from anywhere in the world. This is a facility set up 10 kilometers from the sea, off the coast of Hadera and costing half a billion shekels to the state budget. The project was designed to temporarily alleviate the acute shortage of gas after Egypt stopped supplying gas to Israel through Sinai and before the gas flow began.

Alongside the buoy, a leased electric company leased, a giant ship capable of absorbing liquid gas and turning it back into gas. Since 2012, IEC has been using a buoy to import liquid natural gas cargoes in the transactions it carries out in the market. These are charges that the IEC purchases from international customers, some of them casual. LNG tankers meet the gasifier in the Cyprus area, the liquid gas flows to it - and it returns to the buoy, returns the liquid gas to a gaseous state and flows it through the marine buoy the national transmission system.

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Attractive prices in the market

At the time of the buoy operation in 2012, LNG prices were about $ 18 or more, and because of the high price they were used only during peak demand in the summer, when the amount of gas from Tamar failed to meet all demand.

But in recent years, LNG prices are gradually falling, allowing the electric company to obtain gas at prices that can compete with "Tamar" prices. In April last year, for example, the electric company managed to buy one charger for $ 4.8 per unit of heat, and a total of 10 purchased all 2019 chargers This is a total volume of 0.8 billion cubic meters (the annual gas consumption of the electricity company is around 5 billion cubic meters).

Attractive prices in the market raise the question of why the country does not make more use of the marine buoy to increase competition in the gas economy and lower the price of electricity for the consumer. Having previously designed additional buoys, including one off the coast of Tel Aviv, in recent times, calls have been made to stop using the buoy because of its operating costs, or leave it to use only during emergencies.

The Electric Company said in response that "The Board of Directors of the Electric Company approved the purchase of two liquefied natural gas shipments in order to preserve the quality of natural gas on the LNG liner and to match the gas supplied from the Israeli gas fields. In addition, the Board of Directors approved liquid gas cargo purchases on short notice, as needed. "The company added that even though liquid gas prices today are low, it should be remembered that they may change according to market conditions.