Palestinian Power Firm Cancels Natural Gas Deal With Israel

Cancellation may take effect in 30 days.

Tova Cohen
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Drilling at the Leviathan natural gas field off the Mediterranean shore. Credit: Courtesy Albatross
Tova Cohen

REUTERS - The Palestine Power Generation Company (PPGC) has cancelled a deal to buy about $1.2 billion of natural gas from the Leviathan field off Israel citing delays in development of the giant project.

Development of Leviathan have been thrown into doubt after Israel's competition regulator recommended in December the break-up of what it says is monopoly control of the country's offshore gas reserves by Noble Energy and Delek Group , which hold 85 percent of Leviathan.

In 2014, PPGC signed a 20-year deal to buy up to 4.75 billion cubic metres (bcm) of gas once Leviathan starts production later in the decade.

PPGC said certain conditions had not been met, including failure to secure approval from the anti-trust authority as well as other regulatory approvals. It also cited delays in development of the project, Delek Drilling, a partner in the field, said.

The cancellation will take effect in 30 days, unless anti-trust approval is secured before then, Delek said.

The largest offshore gas discovery for a decade, Leviathan has estimated reserves of 22 trillion cubic feet (622 bcm). Production had been expected to begin in 2018 following an initial investment of around $6.5 billion.

Texas-based Noble Energy owns 39.66 percent of Leviathan. Delek Drilling and Avner Oil Exploration, units of Delek Group, hold 22.67 percent each, and Ratio Oil Exploration owns 15 percent.

Noble and Delek also control the nearby Tamar field, which started producing nearly two years ago from reserves estimated at some 10 tcf.

Israel's anti-trust regulator said the companies have too much control over Israel's natural gas reserves and should be forced to sell some of their assets.

PPGC aims to build a $300 million gas-fired power plant in Jenin in the Palestinian-controlled West Bank. The Palestine Development and Investment Inc holds an 18 percent stake in the PPGC.

The cancellation will take effect in 30 days, unless anti-trust approval is secured before then, Delek said.