Oil Refineries Ltd. is exposed to millions of dollars in damages due to delays in the delivery of Egyptian natural gas, which was supposed to begin on March 1. Egypt’s East Mediterranean Gas Company (EMG), which had promised to resume deliveries by the end of the month, following an explosion on a pipeline in Sinai, will probably announce another delay.
The financial damage to Oil Refineries can be estimated from its announcement of the supply contract with EMG, which stated that the company will save $130 million a year by the switch to natural gas. Oil Refineries is also exposed to a personal directive of Minister of Environmental Protection Gilad Erdan, requiring the company to switch to natural gas by May 22, or face criminal proceedings.
Oil Refineries said, “The agreement with the Egyptians is part of an international agreement. According to statements by the Egyptian military council, the agreements will be kept, so we have no doubt that the gas will be delivered. Oil Refineries has alternatives for every contingency, which will be weighed if a problem emerges, but, as we said, we believe that the contracts will be honored.
“According to the Natural Gas Pipeline Company, construction of the pipeline (to Haifa Bay) has been completed, and the application to begin its operation has been submitted to the Natural Gas Authority for approval. In any event, it would be improper to impose personal directives on Oil Refineries to switch to the use of natural gas if it does not arrive because of force majeure or other circumstances beyond the company’s control.”