Noble Energy, the operating partner in the offshore Tamar natural gas field, has warned customers that supplies could suffer interruptions because the pipeline delivering gas has reached its capacity, TheMarker has learned.
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Noble — representing its partners in the field Alon, Delek Group and Isramco — told customers it may exercise the “interruptible contract” clause in its contracts with them. That would allows the Tamar partners to allocate deliveries of limited supplies as it sees fit without having to compensate customers for nondelivery.
The Tamar partners confirmed the warning in a statement to TheMarker.
“In the gas contracts we signed years ago it was stated that because of capacity limitations, a mechanism could be put into effect that with the addition of new customers, for instance Dalia Power Energies, some of the agreements will transition to an interruptible basis,” it said. “With the start of operations at the Dalia power station and in accordance with the terms of our contract, we have informed the relevant customers on the transition to this model.”
Failure to get enough gas would force private power stations and big industrial users to turn to higher-cost oil and pass the expense on to their customers.
In the letter to customers, the Tamar partners cited increased demand expected when the privately owned power station operated by Dalia begins operations, fueled by gas from Tamar. The plant, located near Kiryat Malakhi, east of Ashdod, will be one of Israel’s largest, with generating capacity of 870 megawatts.
The warning comes at a sensitive time. Natural gas has emerged as a major source of energy for Israel. Israel used about 7.57 billion cubic meters of natural gas last year, a 9% increase over 2013, with consumption forecast by the government to grow another 13% in 2015.
But the gas cartel of which Noble is the leading member is facing antitrust scrutiny. Antitrust Commissioner David Gilo at the end of last year rescinded an agreement allowing Noble and Delek to control both Tamar and the much larger Leviathan field now in development, but has not issued a new decision. He may be waiting for a new government to take office next week.
As it is the single pipeline linking Tamar — located offshore in the Mediterranean Sea and Israel’s biggest gas field by far — briefly reached its maximum capacity last summer when demand for electricity is highest. The addition of the Dalia plant to its customers will again be testing its capacity, Noble warned.
But sources at the Energy and Water Resources Ministry said on Tuesday they were unaware of any announcement by Noble. They said there was no reason to believe the pipeline was anywhere near capacity and they saw no reasons for the gas supply to be interrupted.
Sources in the energy sector, meanwhile, said natural gas consumption in Israel has been lagging forecasts and that there may, in fact, be a surplus of natural gas in the country. Recently the Energy Ministry’s Gas Authority estimated that demand for gas was about 10% below projections, with virtually no increase in demand over the past two years.
Although customers were concerned on several occasions over the past year that the Tamar partnership might activate the interruptible contract clause, if for only a few hours, it never has. The sources, who asked not to be identified, suggested that the timing of the announcement may be aimed at providing an indirect the warning about the antitrust threat.
Noble has frozen development of the Leviathan field until the uncertainty about antitrust issues has been resolved. The company, together with many energy experts, has warned that delays risk slowing development of gas-transmission infrastructure and the Leviathan field.
But exercising the interruptible clause also risks exposing the power of the gas cartel, people in the industry said. As it is the government’s Electricity Authority has pointed to the clause as an example of “imbalance in the distribution of risks between the buyer and seller of gas that impose extra costs on the public.”
At the end of 2012, the authority insisted that contracts include a clause that in the event supply is interrupted for more than 1,000 hours total in the course of a year, customers are entitled to a 10% reduction in price. That is the practice in many contracts overseas, it noted.
But Noble refused to amend the contracts that were already signed on the grounds that the Electricity Authority had no right to intervene on gas prices and terms.