Israel's Leviathan Signs $1.2B Deal With Palestinian Power Company

The partners in a large offshore Israeli gas field said Sunday they have signed an agreement to sell natural gas to Palestine Power Generation Co., the first export deal to be signed in the growing Israeli energy sector.

The partners in the Leviathan gas field, which include U.S.-based Noble Energy Inc. (NBL) and Israeli conglomerate Delek Group Ltd. (DLEKG.TV), said they will sell 4.75 billion cubic meters of gas to Palestine Power Generation Co. for $1.2 billion over 20 years.

The deal comes as U.S. Secretary of State John Kerry remains in the region attempting to broker a peace deal between representatives of Israel and the Palestinian Authority.

The Palestine Power Generation Co. aims to build a power plant to supply electricity to areas of the West Bank.

Although there are several initiatives underway for producing its own power, the Palestinian Authority-controlled areas of the West Bank currently buy electricity from Israel's state-run power company, to which they owe large back payments. There is one small power station in Gaza but, there too, residents mainly rely on a power supply from Israel.

Israel also supplies water and other utilities to Palestinian areas of the West Bank.

The Leviathan field, which contains about 19 trillion cubic feet of gas, is scheduled to begin production later this decade. Some of the gas from Leviathan has been earmarked for export, although this is the first deal to be signed with a non-Israeli entity. Israeli government officials and those in the energy sector say they would like to export gas to the Palestinian Authority, Jordan and Egypt because it is more economical to sell to geographically-close customers, but others remain skeptical that such deals will materialize due to political tensions.

The nearby Tamar field contains about 9 trillion cubic feet of gas and began production in March, but most of this has been dedicated in contracts to Israeli companies.

On Sunday, shares of Delek Group closed up 14 shekels ($4.00), or 1.05%, at ILS1,350.00 in a higher Tel Aviv market.

(DowJones)