Leviathan signs agreement to supply natural gas to Paz Ashdod refinery

TEL AVIV -- On Nov. 24, 2016, an agreement for the supply of natural gas was signed between the Leviathan Partners and the Paz Ashdod Refinery Ltd., according to which the company will purchase natural gas from the Leviathan Partners for the operation of the Purchaser's facilities in Ashdod.

According to the Supply Agreement, the Leviathan Partners have committed to supply the Purchaser with approx. 3.12 BCM of natural gas, according to the terms specified in the Supply Agreement.

The period of the Supply Agreement will begin upon the execution date of the Supply Agreement and is expected to expire at the earlier of the following dates: (1) The date on which the Purchaser will consume the TCQ; (2) 15 years after commercial quantities of gas have been provided from the Leviathan gas field to the Purchaser. The parties have the right to extend the period of the Supply Agreement for a period of up to one year or until the TCQ has been consumed, whichever is the earlier.

The Purchaser has undertaken to Take or Pay for the Minimal Annual Amount of gas in accordance with the scope and arrangements fixed in the Supply Agreement.

In accordance with the provisions of the Gas Outline Plan, the Purchaser holds an option to reduce the Minimal Annual Quantity to an amount that is equal to 50% of the average annual amount that was consumed in the 3 years prior to the date on which the option exercise was announced, in accordance with adjustments that were stipulated in the Supply Agreement (“Reducing the Purchased Quantity”). Reducing the Purchased Quantity is possible at any time during the period starting at the later of these two dates and ending 3 years after this date: (1) Once 4 years have passed since the date on which the Petroleum Commissioner had approved the transfer of rights to the Karish and Tanin holdings according to the Gas Outline Plan (“the Option Opening Date”); (2) 5 years after the date on which gas flow has started from the Leviathan project to the Purchaser. The announcement for exercising the option for Reducing the Purchased Quantity will become valid 12 months after the aforementioned announcement is made. Once the Purchased Quantity is reduced, the other quantities that were set in the Supply Agreement will be reduced accordingly.

In accordance with the arrangements established in the Gas Outline Plan, the Supply Agreement states that the gas price will be partially linked to the price of a Brent barrel, and partially to the electricity manufacturing cost, as it will be set from time to time by the Electricity Authority, and including a "Floor Price."

The Purchaser is a subsidiary of Paz Oil Company Ltd., which engages in the import, refining and distribution of crude oil, as well as manufacturing and selling electricity.

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