Israel Chemicals to buy gas from Tamar, Leviathan fields

Israel Chemicals has reached agreements with Noble Energy and its partners to buy gas from the Tamar and Leviathan fields, offshore Israel, making sure it has a secure gas supply in case there’s a hiccup in delivery from Energean’s fields in the Mediterranean Sea.

Israel Chemicals on Wednesday entered into two gas supply agreements, to secure its gas supply needs until the commercial operation of the “Karish” and “Tanin” gas fields by Energean or, in case its agreement with Energean terminates, until the end of 2025. Energean is expected to make a Final Investment Decision for its Karish and Tanin fields in the first quarter of 2018.

The Tamar part of the deal calls for the Tamar partners to continue the current gas supply to the Israel Chemicals from the Tamar gas field, for the supply of the Israel Chemicals’s full gas
requirements in Israel.

“The Tamar Agreement is an interruptible supply agreement, which may become a firm supply agreement, upon the Sellers’ notice to this effect to the Company,” Israel Chemicals said in a statement on Thursday.

According to Israel Chemicals, on June 1, 2020, the Tamar Partners are required to reduce the quantities under the Tamar Agreement by fifty percent (50%), which would reflect one half of the Israel Chemicals’ gas requirements”

As for the Leviathan gas delivery agreement, once the field starts producing – late in 2019 –  Israel Chemicals may exercise an option, at its discretion, to take a certain amount of gas from the Leviathan in the event that Tamar Group is unable to meet the company’s gas requirement. Furthermore, Israel Chemicals said the deals has a mechanism that protects the Company from incurring dual take or pay obligations under the Tamar and Leviathan Agreements in respect of the same quantity of gas.

The estimated cost of the Israel Chemicals’ gas consumption under the two agreements for the duration of the maximum period until December 31, 2025  – in the event that the Israel Chemicals agreement with Energean is terminated – is the range of approximately $1.1 billion – 1.2 billion for an aggregate quantity of approximately 6.0 billion cubic meters of natural gas.

Related: Energean moves towards Karish & Tanin project FID with new gas sales contracts

In the event that Energean achieves commercial operation by the end of 2020, then the estimated cost of the Israel Chemicals’ gas consumption under the Tamar & Leviathan agreements until such date, will be in the range of approximately $400-450 million, for around 2.2 billion cubic meters.

Israel Chemicals is is entitled to terminate the agreement with Noble and its partners as of the final quarter of 2020, subject to prior written notice, to coincide with commercial operation under the Energean Agreement.

However, if Energean is unable to achieve commercial operation the Tamar & Leviathan agreements will automatically extend until December 31, 2025, such that Israel Chemicals will have secured the gas price as stipulated in the gas framework, until December 31, 2025.