Dalia Energy Takes New-Med and Ratio to London Arbitration Over $6.7 Billion Gas Deal

Dalia Energy, a private electricity company controlled by Eshel Energy, has initiated international arbitration proceedings in London against New-Med Energy and Ratio Oil Exploration over a disputed $6.7 billion gas deal concerning the Leviathan field. Dalia seeks to have the arbitration panel declare the agreement valid and invalidate the sellers' cancellation notice.

The arbitration request outlines three primary demands. First, Dalia wants a declaration that the cancellation notice is invalid and contrary to the agreement or law. Second, even if the cancellation is deemed valid, Dalia argues the agreement remains in effect because regulatory approval from the Antitrust Authority was obtained within the contractually stipulated timeframe. The third demand is a general declaration that the agreement has entered into force according to its terms. Dalia also reserves the right to seek further remedies, potentially including financial compensation, at a later stage.

The dispute stems from a disagreement over the timeline for fulfilling contract contingencies, particularly the Antitrust Authority's approval. The agreement specified a 90-day window for this approval, and the parties differ on when this period began. The Antitrust Authority ultimately granted an exemption from restrictive trade arrangement approval without conditions, except for a clause regarding the legality of secondary gas sales, which was left for the parties to assess. Despite this, New-Med stated it would proceed with the cancellation.

Dalia Energy, which operates a power station providing approximately 8.5% of Israel's electricity, intends to use the gas from Leviathan to fuel two new combined-cycle power plants, each with a capacity of about 850 megawatts. These plants, located in Tzafit and Ashkol in Ashdod, represent an investment of approximately 10 billion shekels, with bank financing already secured. The contract with New-Med and Ratio was crucial, as it was set to supply about 65% of the gas for these new plants, with the remainder coming from Energean's Karish-Tanin fields.

The contract stipulated a binding supply of approximately 1.3 billion cubic meters (BCM) annually, increasing to about 1.7 BCM for roughly 20 years, with prices linked to electricity tariffs. Dalia committed to a minimum take-or-pay quantity. The arbitration is expected to take many months, potentially over a year, but the gas supply is not scheduled to begin until the early 2030s, allowing time for a resolution or settlement before the power plants require the gas.