Israel : Peak energy

Israel Electric seeks government aid to buy fuel for power generation

Platts,

2 March, 2012

Israel Electric Corp has informed the government that it will be unable to purchase fuel for electricity production in the peak summer months without massive government assistance, the state owned IEC said in a statement late Thursday. 

The announcement by the utility followed a further cut Thursday in gas supplies from the sole local supplier. 

Israeli energy industry sources said that the IEC management sent an urgent request for aid to cover the huge increase in fuel costs. 

The company has switched to using gasoil and fuel oil to run many of its power plants. 

The IEC predicted late last year that its fuel bill was likely to increase by $1.4 billion in 2012 due to the increase in gasoil and fuel oil consumption. But it now appears the amount will be closer to $2 billion. 

Israeli gasoil consumption for electricity rose by 200% last year to 636,000 mt. 

And the energy and water ministry said the trend is due to intensify this year as a result of the acute shortage of natural gas as a result of the faster-than-expected depletion of the Mary B well off of Israel's southern Mediterranean coast and the cutoff in Egyptian gas deliveries over the past year. 

In December, IEC announced that the Vitol Group had been awarded a tender for the supply of 750,000 mt of gasoil with an option for an additional quantity of 300,000 mt. But Israeli energy industry sources said that the volumes of imported gasoil are likely to be far higher. 

On Thursday, the Yam Thetis consortium reduced supplies from 300,000 cubic meters/hour to 150,000 cu m/hour. This was the third reduction in recent months. 

Last month, Israeli energy and water minister Uzi Landau warned that Israel is facing an unprecedented electricity crisis that could lead to shortages and blackouts during the peak summer months. And he said that the government had decided to establish an inter-ministerial team to deal with the situation. 

Separately, the Yam Thetis consortium is also planning to bring on line the small Noa field located adjacent to Mary B this summer and LNG imports are also planned for the end of the year or early 2013. 

While the additional volumes are only expected to partially alleviate the crisis, a major improvement is only expected in mid-2013 when the huge Tamar offshore gas field is due to begin commercial production.

--Neal Sandler, newsdesk@platts.com