NewMed Cancels $6.7 Billion Gas Deal With Dalia Amid Antitrust Review

NewMed Energy, a major stakeholder in Israel's Leviathan gas field, has announced the cancellation of a significant 20-year, $6.7 billion natural gas supply deal with Dalia Energy. The agreement was intended to provide gas for two new Dalia power plants, "Dalia 2" and "Abshel." The cancellation, which occurred around the Sukkot holiday, surprised the market and Dalia Energy, who legally rejected the termination.

The move is widely seen as a negotiating tactic aimed at pressuring the Israel Competition Authority (ICA), which has been reviewing the deal for several months and may impose conditions unfavorable to the parties. The ICA has expressed reservations about the deal's long duration, extending to 2050, and its limitations on reselling gas to third parties. Specifically, the authority prefers shorter contract terms to allow for market flexibility and potential new gas discoveries. They also want to encourage a secondary gas market by increasing the cap on resale to third parties, which NewMed opposes to prevent arbitrage on their relatively low-priced gas.

The deal, signed in May, involves supplying gas between 2030 and 2050. NewMed and Ratio Energy (holding 15% of Leviathan) are the sellers, while Dalia Energy, which needs a stable, long-term gas supply for its new plants, is the buyer. The gas was set to be sold at an initial price of $4.7 per heat unit, considered attractive. However, a meeting with the ICA on September 23 revealed significant objections, potentially reopening the entire contract, including pricing.

Industry sources suggest NewMed's cancellation announcement serves as an ultimatum: approve the deal as is, or it will be voided. Analyst Lior Weider described it as an "aggressive negotiation tactic by the sellers" towards the ICA. The original contract stipulated 90 days for approvals, but the ICA has 150 days from the filing date, expected to end in late December. The ICA has already postponed its decision twice, citing the deal's unprecedented size and implications.

Despite the dramatic cancellation, the deal is still expected to proceed due to its strategic importance for both the parties and Israel's energy sector and economy. The ICA also sees competitive benefits, such as setting a precedent for separate sales from gas field partners and securing lower gas prices for the domestic market. Coinciding with this, NewMed recently appointed a new CEO, Yaniv Sarna, who faces this major antitrust battle as his first significant challenge.