Thanks to increased competition in the gas economy: The IEC announced today (Monday) that after lengthy negotiations, an amendment was signed to the natural gas agreement with the Tamar partnership, according to which the company will receive a 29% discount.
The amendment to the agreement will significantly reduce IEC costs.
As you may recall, the original agreement signed by the IEC in 2012 provoked sharp public criticism due to the fact that the natural gas it bought rose to $ 6.36 per unit of heat, due to the linkage to the American index.
Under the new agreement, the base price will be about $ 4.5 per unit of heat with the indexation hedging of the rise in the US index in the range of 2.25% to 3.75%.
It should be noted that in the original agreement it was possible to reduce the price of gas at an exit point of up to 25%, and in practice a higher discount was obtained (29%), compared to increasing quantities and extending the agreement until 2030.
However, it is important to note that the reduction will only be reflected in the tariff update for next year, and meanwhile starting in February the electricity tariff will jump by 4.9%.
IEC, Photo: Yehoshua Yosef
Beyond that, in the original agreement, Tamar undertook to save the electricity company an additional 3.5 bcm each year, which will be sold at the price of the base index linked to the US index at $ 6.36 as of today.
In the new agreement, Tamar undertakes to keep the same quantity and sell it at a price of less than $ 4 without linkage.
The IEC will purchase according to its operational needs 16 BCM spread over the years until the end of 2030. In mid-2028 (the date from then on there is no longer a commitment to purchase basic quantities but only a commitment according to operational need). According to market prices in Israel at that time.
The IEC says that the company's operational need in the next decade will require the purchase of more gas in a quantity similar to the operating quantity, the IEC plans to purchase it in a competitive process at the lowest price offered to it.
As part of the risk management, the company believes that 16BCM "in hand" is better at the cheapest price in Israel when there is an obligation of the reservoir to keep the amount to the IEC without any additional minimum obligation (except on the basis of operational need) than a tender whose prices are unknown to anyone. Quantities without minimum commitment of the company.
Ofer Bloch, CEO of the Israel Electric Corporation, said: "The nature of the long-term agreement is that it contains clauses that only in retrospect turn out to be more or less good.
The original Tamar agreement was signed in an environment of uncertainty and was the first of its kind in the economy.
The renewed agreement we are bringing today is in line for the public.
The price of gas that the IEC will pay to supply in its overall production mix, provides stability at a good price and reflects the result of stubborn and quality negotiations. "
Jeff Ewing, director of Chevron East Mediterranean, which operates the Tamar reservoir, said: "The agreement reached by the parties is another example of Chevron's commitment to build relationships based on trust and mutual benefit through cooperation with the public, government, customers, suppliers and business partners. More ".
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