Second big contract in a week is 15-year agreement to supply more than $1 billion of natural gas to two private power plants.
By Eran Azran | Mar. 13, 2014

The Tamar natural gas field partners on Wednesday announced their second big contract in a week, a 15-year agreement to supply more than $1 billion of natural gas to the private power plants in Alon Tavor and Ramat Gavriel.

Taking into account the $750 million contract with the Delek Group’s Sorek IPP power plant that the partners announced Sunday, the Tamar field has now won commitments from customers to buy $1.85 billion in gas. Last month, two Jordanian companies signed their first export deal, a $500 million contract for their Dead Sea region facilities.

The Tamar field will supply 4.5 billion cubic meters of gas to two private power companies over 15 years, estimated to be worth $1 billion. The companies that will buy the gas are Ramat Gabriel Ltd. and Alon Tabor Ltd., under the agreement signed over the past week.

The Alon Tavor power plant is located in the complex owned there by Tnuva, Israel’s largest food supplier. The new Ramat Gavriel power plant is located near Migdal Ha’emek, in the Nilit factory, which manufactures nylon fibers and thermoplastics. The cogeneration plants are planned to generate 55 megawatts of power each for their respective factories.

The deals are subject to approval of Israel’s antitrust authorities and closing the financing for the enterprise.

The sale is on a “take or pay” basis, with a minimal annual amount, and the deal will last 15 years or until the total amount is supplied.

In the deal signed Sunday, the Tamar field will supply 3.3 billion cubic meters of gas over 15 years to the 140-megawatt IPP power plant, which is fully owned by Delek Group and will power a water desalinization plant.

Texas-based Noble Energy owns 36% of the gas field. Israel’s Delek Group, through its units Avner Oil Exploration and Delek Drilling, holds a 31.25% share. Isramco Negev has a 28.75% stake, and Alon Natural Gas Exploration holds 4%.

As for the Jordanian deal, Tamar will supply 66 billion cubic feet of gas a year to the Jordan-based Arab Potash Company and Jordan Bromine Company, a joint venture between Arab Potash and the Louisiana-based Albemarle Holding Company, Noble Energy announced last month.

In total, the Jordanian buyers have agreed to buy about 1.8 billion cubic meters of natural gas over 15 years, at an estimated value of at least $500 million. The U.S. State Department was involved in getting the deal signed.

Tamar’s sales to Jordan are expected to start in 2016, once the minimal required infrastructure has been completed.

The much larger Leviathan field nearby signed a 20-year, $1.2 billion deal last month to supply gas to a planned Palestinian power plant once Leviathan starts production in 2016 or 2017. Leviathan is estimated to hold about 540 billion cubic meters of gas, enough to supply Europe for a year.

Tamar has an estimated 300 billion cubic meters of gas, including its nearby satellite field. Tamar began supplying Israeli industry with natural gas in March of last year, and the partners have signed deals so far for 200 billion cubic meters, which leaves them quite a bit of room for future sales. The field came online months after Egypt halted gas supplies to Israel.

After a lengthy and heated debate, the Israeli government last year decided to allow 40% of its natural gas reserves to be exported, while Tamar can sell up to 50% of its reserves. Following the agreement with Jordan, Tamar is free to sign export contracts for an additional 48.2 billion cubic meters.

Tamar and Leviathan were two of the largest gas finds in the past decade, and turned Israel into a gas exporter. In February, Australia’s Woodside Petroleum signed a deal to take a 25% stake in Leviathan for up to $2.55 billion.