West Bank utility agrees to buy $1.2 billion worth of natural gas for a power plant to go up near Jenin.
By Eran Azran | Jan. 6, 2014

The first customer to sign up to buy gas from Israel’s giant Leviathan field is the Palestine Power Generation Company, which is developing an electric power plant near Jenin.

The three Israeli partners in Leviathan – Avner, Delek Drilling and Ratio — told the Tel Aviv Stock Exchange on Sunday that PPGC had agreed to buy $1.2 billion worth of gas over a 20-year period that will begin when the field begins producing.

The 4.75 billion cubic meters of gas the Palestinian utility is buying is relatively small compared to the contracts a host of Israeli gas consumers have signed for gas from the Tamar field. Nevertheless, it marks the first-ever contract for Leviathan gas.

“I believe a strong and stable economy shared by the two sides will bring peace and stability to the entire region, so that everyone will enjoy prosperity and economic growth,” said Yitzhak Tshuva, whose Delek Group controls two of the Leviathan partners.

Leviathan has an estimated 538 billion cubic meters of reserves and it may have petroleum as well. PPGC has the right under the contract to reduce the amount of gas it buys.

The news of the contract came out of the end of the trading day on the Tel Aviv Stock Exchange, so that the impact of the sale wasn’t reflected in the partners’ share prices. Ratio rose 3%, Avner , 0.8% and Delek Drilling by 0.3%. Delek Group, which controls the latter two companies, climbed 1% by close.

The biggest of the Leviathan partners, Noble Energy, is based in Texas and trades on Wall Street.

PPGC is constructing a $300 million, 200-megawatt power plant that will take 30 months to complete. It is controlled by the Palestine Electric Company but counts other shareholders as well.

The Palestinian Authority accounts for 8% of all electricity consumption in Israel and the West Bank, with annual consumption growing at about 6%.

The agreement include several conditions, among them final approval to develop the Leviathan field by the sellers as well as all the regulatory approvals to export gas as well as financing. The buyers also conditioned their side of the deal on completing the construction of the power plant.

Under the gas-export policy established by the Israeli government, gas sold to the PA and to Jordan will be considered part of Leviathan’s export quota. All told, 40% of Israel’s natural gas can be exported under the rules approved by the cabinet last year.

Last week, the Leviathan partners reported progress in talks with the Australian energy company Woodside, which agreed in principle over a year ago to take a 30% stake in the field for $1.25 billion. Reports says that the two sides have agreed that Woodside will pay several-hundred million dollars more than the original agreement called for as prospects are growing that the gas will be exported by pipeline to regional customers, mainly Turkey, instead of as liquefied natural gas to East Asia.


Palestinian power company signs natural gas deal
Published Sunday 05/01/2014 (updated) 08/01/2014 10:55

BETHLEHEM (Ma’an) — Palestine Power Generation Company has signed a 20-year-deal with Israeli and American natural gas companies, the Palestinian Authority’s minister of energy said.

Omar Kittaneh said that a power plant would be built in the West Bank on land designated by the Palestinian cabinet, and that bids for the project are now open.

Partners in Israel’s Leviathan natural gas field signed a $1.2 billion deal with PPGC, Reuters reported.

According to the Reuters report, PPGC plans to build a $300 million power plant in Jenin that will be operated by the gas from the deal.

The Leviathan natural gas field is located in the Mediterranean Sea west of Haifa.

First Power Plant in Jenin to Bring Down Prices, Says Official

By Jafar Sadaqa

RAMALLAH, January 7, 2014 (WAFA) – Omar Kittaneh, the head of the Palestinian Energy Authority, said that even though the Palestinian government is not party to the contract signed on Sunday between privately-owned Palestinian and Israeli power companies, yet the government role is to guarantee that electricity prices remain low.

The Jenin-based Palestinian Power Generating Company and the joint American-Israeli Delek Drilling-Noble Energy signed a contract in Jerusalem to supply the Palestinian company with natural gas to generate electricity from a power plant that will be built in Jenin.

Under the terms of the agreement, Delek-Noble will supply the Jenin plant, which is expected to be ready in two years, with one billion cubic meters of natural gas worth $1.2 billion over a period of 20 years.

“This is the first time an agreement between two private companies bound by commercial specifications and international criteria is signed to purchase a product, taking into account the rights and obligations,” said Kittaneh.

“We did not intervene in the price agreed on by both companies, and we were not part of the contract,” he said. “Still, we insisted that the agreement should ensure lower prices that enable the company to produce energy at a cheaper cost than that we buy from other sources.”

He said he expects to see “a noticeable cut in the price of electricity, which will relieve the burden of the high cost of electricity from both the government and the people.”

Kittaneh stressed that cost of the gas will be paid by the Palestinian company directly to the American-Israeli company, which means Israel cannot deduct any outstanding debt, if there will be one, from the Palestinian tax revenues it collects on behalf of the Palestinian Authority on imported goods intended for the Palestinian areas.

He further highlighted the importance of the agreement to ensure stable gas supply for 20 years as stipulated in the contract, which is the normal time for the work of power generating stations.

Moreover, he said the agreement is considered “a corner stone” on the road for the independence of the Palestinian energy sector.

“Ensuring stable and sufficient supply of fuel should precede the construction of the power generating plant in order not to encounter the same problems we faced with the power plant in Gaza,” he said.

The Gaza power plant built in the late 1990s gets its diesel fuel needs every day from Israel after the Palestinian Authority pays for it. This supply is nevertheless constantly interrupted due to political or economic reasons leaving the 1.8 million residents of the Gaza Strip and its facilities without electricity for many hours every day.

Construction of the new Jenin power station is expected to start soon and will continue for two- and-a-half years during which a pipeline to transfer gas from Israel to the station will also be built.

The station will produce 200 Mega Watt of electricity annually, which is enough to cover the needs of the northern West Bank districts. The electricity will be bought and distributed through companies owned by the local councils, which are anyhow shareholders in the power plant as recently decreed by the cabinet.

“This will be the first power plant in the West Bank,” said Kittaneh, “which will be followed by other plants that will be expected to meet the needs of the central and northern West Bank areas until we reach complete independence of the energy sector.”

He said the gas will be bought from the American-Israeli company and has nothing to do with the Palestinian gas field off the Gaza shore.

He said there is progress in the issue of drilling gas from the Palestinian field, which is estimated to have gas reserves at around 30 billion cubic meters capable of supplying the Gaza Strip with natural gas for more than 30 years.

Answering a question regarding supplying the West Bank power plants with the Gaza gas, Kittaneh said that “for us, we are interested in seeing the Gaza power plant get gas extracted from the Palestinian field. But in case an agreement is reached to transfer the Palestinian gas through the Israeli pipelines, which is one option among many to market the Palestinian gas, then we will enter into the equation of mixing in this network since the Palestinian side will become one of the suppliers to this pipeline.”

He said that in this case, “the revenues will be divided among the supplies based on the amount each one pumps into the pipeline.”