Israel's Competition Authority Approves Most of Leviathan Gas Deal with Dalia Energy

Israel's Competition Authority has approved the majority of a significant gas deal between Dalia Energy and the owners of the Leviathan gas field, NewMed Energy and Ratio. This decision comes after NewMed and Ratio announced their intention to cancel the agreement two weeks prior, a move Dalia Energy contested as invalid. The Authority indicated it was prepared to grant an exemption for nearly the entire deal, finding no significant harm to competition. The primary point of contention was Dalia Energy's ability to resell gas purchased under the agreement.

The deal, signed in May, was intended to secure gas supply from the Leviathan field for two new power generation units Dalia Energy is developing in Ashdod and Tzefit. Each unit is expected to have a capacity of approximately 850 megawatts. Under the agreement, gas supply was slated to begin in January 2030 and last for 20 years from the commercial operation date of the power stations. NewMed and Ratio, which jointly hold about 60% of the Leviathan field, committed to supplying Dalia Energy with 1.3 billion cubic meters (BCM) of gas annually at the start of the contract, increasing to 1.7 BCM per year later. The total value of gas purchases over the agreement's lifespan was estimated at $6.7 billion.

In late September, NewMed and Ratio informed Dalia Energy of the cancellation, citing unmet conditions for the agreement's activation. Dalia Energy rejected this, asserting the cancellation was not in accordance with the contract's terms. At the time, market speculation suggested the difficulty in obtaining Competition Authority approval in its original form was a key factor in the cancellation attempt.

However, the Authority's recent decision suggests that most of the deal could proceed. Commissioner of Competition Michal Cohen determined that the arrangement between Dalia and NewMed and Ratio was unlikely to cause substantial harm to competition. She found that key restrictions within the agreement, such as the long-term commitment and the 'take or pay' mechanism (requiring Dalia to purchase or pay for a minimum gas quantity), were necessary for the deal's realization. The Authority noted that such long-term contracts provide Dalia with certainty regarding gas supply and price, which is also required by financiers of power plants, while offering gas suppliers predictable future demand and revenue.

The sole unresolved obstacle remains a clause limiting Dalia Energy's ability to resell a portion of the purchased gas to third parties. The Competition Authority did not grant an exemption for this specific restriction, stating that the parties had not provided a sufficient justification for its necessity.