The board of directors of the Overseas Private Investment Corporation (Opic) have approved US$250mn in political risk insurance for the construction of a 65-mile pipeline that will serve as the centerpiece of Israel’s natural gas system, reducing that country’s dependence on imported fossil fuels and generating US$200mn in annual savings for electricity generation.


Opic’s insurance will cover a loan for the construction of a pipeline that will be used to transport natural gas produced offshore, from Ashdod in southern Israel to Dor in the north, for downstream power projects in the country. Once completed, the pipeline will be owned by the Israeli government and operated by Israel Natural Gas Lines.



The Israel Electric Corp, the State of Israel, Opic and Citigroup are negotiating the loan documentation and are expecting to close the transaction by year-end.


The Israel Electric Corporation estimates that annual savings from the use of natural gas electricity generation will amount to about US$200mn a year, the majority of which will be passed on to end users through tariff reductions.


“This natural gas pipeline is critical to Israel for economic and environmental reasons,” says Opic president and CEO Peter Watson. “Until recently, Israel had relied almost exclusively on imports to meet its energy needs. This project will exploit recently-discovered offshore natural gas reserves to significantly reduce Israel’s dependence, in the process using an energy source – natural gas – that is cheaper and less polluting than oil or coal.”


According to Citigroup’s country manager for Israel, Gus Felix, “The use of Opic insurance in support of this loan results in attractive all in pricing and, more importantly, taps an entirely new source of funding for Israeli infrastructure projects.”


According to Yaron Zelekha, accountant general of the State of Israel, “Opic’s insurance coverage and the proposed financing by Citigroup provides an additional attractive alternative for the financing of such projects in Israel.”