Israel’s biggest gas deal, between Israel Electric Corporation (IEC) and the Tamar reservoir, is in difficulties and in danger of being cancelled, “Globes” has learned. Only a month ago, things looked different. At that time, a non-binding memorandum of understandings was signed between IEC and most of the partners in the Tamar reservoir on a ten-year agreement worth over NIS 8 billion, which was meant to moderate the expected rise in gas prices.
Now, however, matters have taken a different turn. The negotiations have run into trouble, and may be on the point of breaking down altogether. Because of this, sources inform “Globes”, IEC is negotiating with the Leviathan reservoir partners. Although Leviathan is committed to large exports to Egypt, production is expected to be expanded to facilitate an agreement with IEC. This will require a tender process, and there is also the possibility of purchases from both reservoirs.
In the background is the fear that Israel’s gas production capacity will be exhausted as new power plants come on stream by 2030. At any rate, what is certain is that Chevron, which operates both the Tamar and Leviathan reservoirs, will benefit either way. IEC’s gas supply contract is critical for electricity prices, and also represents a benchmark for agreements by the private power producers.
Inferior position in negotiations
Although IEC is not responsible for most of the power production in Israel, it is still the largest single producer by a long way, with some 40% of the market. IEC currently buys gas from Tamar under a long-term agreement originally signed in 2012, and its stability enabled gas prices in Israel to remain low in comparison with Europe, despite all the geopolitical upsets. The company signed a further agreement in 2022, due to continue in effect until 2030.
Because of the fears of a rise in gas prices, IEC seeks to amend the agreement and extend it to the end of 2036, but at present the gaps between IEC and some of the partners in Tamar are fairly wide, and the deal may be about to break down.
The fears of higher gas prices arise from Israel’s large gas exports agreements and high domestic demand. The joint committee of the Ministry of Finance and the Ministry of Energy on gas prices has warned that “in the coming years there will be a rise in demand for natural gas, among other things because of the conversion of power plants owned by Israel Electric Corporation to natural gas and the construction of new power plants operating on gas by 2030.”
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A rise in the price of gas will be difficult to take for the Israeli economy, and Minister of Energy Eli Cohen has said, “Anyone who takes advantage of their power and raises prices will have me to reckon with. A long as gas is being sold at fair prices to the Israeli market, that’s excellent. If the gas partnerships raise the prices offered to the Israel Electric Corporation, they will bear the consequences.”
NewMed Energy, which has the largest stake in the Leviathan reservoir, says that thanks to gas exports it will be able to expand production, and thus supply the needs of IEC as well. The Leviathan partners are in initial talks with IEC with the aim of offering an alternative to Tamar.
A mentioned, the party that will gain in any event is Chevron, which operates both the Tamar and the Leviathan reservoirs. Its interest is to export as much as possible, and it is not very important to it which of the reservoirs it operates supplies gas to IEC. Although the principle of separate sales prevents it from actively conducting negotiations from both sides, it will probably be happy with any result. Presumably for that reason it is keeping its distance on the matter, and has chosen not to respond to questions from “Globes” on the matter.
IEC, the Public Utility Authority for Electricity, and Chevron, refused to comment on the details of the negotiations currently underway.
Published by Globes, Israel business news – en.globes.co.il – on September 2, 2025.
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