Leviathan Gas Partners Cancel $6.7 Billion Deal with Dalia Energy

NewMed Energy and Ratio, partners in the Leviathan natural gas field, have announced the cancellation of a $6.7 billion deal to supply gas to Dalia Energy's two new power stations. The agreement, signed approximately four months ago, was set to provide natural gas for 20 years. Dalia Energy, however, contends that the cancellation notice violates the contract's terms and insists the agreement remains valid.

NewMed Energy holds about 45% of Leviathan, while Ratio owns 15%. Chevron, the operator with a 40% stake, was not part of this specific deal. The gas was intended for Dalia 2, a power station under construction in Tzafit, and the Eshkol-Avshal station in Ashdod. The original agreement was projected to be one of the largest domestic gas deals, with planned annual supply starting at 1.3 billion cubic meters and increasing to 1.7 billion cubic meters, at an estimated price of $4.7 per heat unit.

The official reason cited for the cancellation is the failure to meet certain conditions precedent within the stipulated timeframe, including securing financing and obtaining approval from the Antitrust Authority. The Antitrust Authority's decision is considered a key factor, given the long-term nature and significant volume of gas involved, which would be committed long-term from the domestic market.

Dalia Energy disputes this, stating that discussions with the Antitrust Authority are ongoing and no final decision has been made. The company views the agreement as binding and emphasizes the importance of the gas supply for its new power stations, which are expected to add approximately 1,700 megawatts of generation capacity at a construction cost of around 10 billion shekels.

For NewMed and Ratio, the situation also involves balancing domestic supply with export opportunities. Leviathan is expanding its production and transmission capabilities, including increased capacity for export to Egypt where prices may be more attractive. This raises questions about gas allocation, as domestic sales reduce the volume available for export. The contract's terms, pricing, and flexibility are therefore crucial.

Currently, the deal is in dispute. If the conditions precedent, particularly the Antitrust Authority's approval, are met and the parties reach an agreement, the deal could still proceed. Otherwise, Dalia Energy may need to seek alternative gas sources, and the dispute over the contract's validity could lead to legal proceedings.