Isramco Versus IEC And BOE: Who Really Sets Tamar Pricing Economics

Where The Real Power Sits

The main article made a simple argument: more Tamar capacity will not automatically become more money if the contract layer does not translate that extra capacity into price, revenue and cash. This follow-up isolates that layer. In 2025 just two customers, IEC and BOE, generated 76% of Isramco's revenue. At year-end they also represented 87% of receivables, 28% with IEC and 59% with BOE.

This is no longer a generic discussion about gas demand. It is an economics story built on two very different contracts. IEC is the domestic anchor buyer. It sets the long-duration baseline price, and through it a pricing dispute can enter the financial statements before the cash outcome is fully settled. BOE is the export buyer. That is where Brent linkage, price-floor protection, price-reset windows, quantity-reduction rights and the direct connection between added capacity and export monetization all sit.

That is the central point. IEC and BOE do not play the same role. IEC sets the local anchor price and the accounting tone of reported revenue. BOE determines whether export is a hard growth engine or a more cyclical outlet that depends on Brent, midstream and contractual quantity flexibility.

That chart matters because it separates the revenue layer from the collection layer. IEC is the biggest revenue customer, but BOE holds the majority of receivables at year-end. In other words, IEC sets the baseline price, while BOE shapes a large part of the export conversion into cash. The partnership says credit risk is low against both customers, but that does not remove the concentration issue. It only means the risk here is less about default and more about pricing formulas, timing and quantity mechanics.

IEC: The Anchor Buyer That Moves The P&L Too

The IEC agreement is not just another large gas-sale contract. It is a layered pricing system. The contract runs until December 31, 2030, and if IEC has not consumed the minimum operational quantity by then, it extends automatically to allow that quantity to be consumed. Until June 30, 2028 IEC is committed to a minimum billed quantity of about 3 BCM per year, and from July 1, 2021 it also committed to a minimum operational quantity of about 16 BCM through the end of the agreement. A footnote clarifies that from 2022 onward the minimum billed quantity plus the operational commitment amount to about 3.5 BCM to 4 BCM per year in practice, subject to the contract terms.

The pricing layer is also split. The minimum-bill price is based on a base price plus U.S. CPI indexation, with plus 1% per year until 2019 and minus 1% per year from 2020 onward, and from 2022 onward also subject to explicit caps and bands on the indexation path. By contrast, the price for the minimum operational quantity and for any additional quantity up to the maximum daily quantity is fixed, slightly below $4 per MMBTU, with no indexation. So IEC is not buying at one clean tariff. One layer behaves like a long-term anchor contract with indexation, while another behaves more like an operating tariff.

That is where the 2025 pressure point comes from. The contract includes two reset dates for the minimum-bill price. The first was already used in the past. The second fell on December 31, 2024, with an allowed range of up to plus or minus 10%. On July 24, 2025 some Tamar partners signed a non-binding memorandum of understanding with IEC that included a price adjustment effective January 1, 2025, an operating-price adjustment from July 1, 2028, an option for additional quantities in 2026 to 2028, and 2 BCM to 3 BCM per year in 2031 to 2035. But the remaining partners did not join before the memorandum expired on October 23, 2025, and on September 9, 2025 the general partner's board decided it was not in the partnership's interest to advance that amendment at the time. By December 2025 IEC had already taken the dispute to arbitration in London, seeking the maximum 10% reduction effective January 1, 2025.

The important point is that this dispute does not stay confined to the legal layer. It also enters accounting. The report explains that in contracts with variable consideration the partnership includes in transaction price only the amount it estimates at a high enough probability not to reverse materially later. In IEC's case it states explicitly that revenue from the amendment is recognized based on an estimate of the expected weighted price per gas unit for the full minimum billed quantity and operational quantity through the end of the contract. So even before an arbitration award arrives, a change in the estimate of the anchor price can already move reported revenue.

That is why the fourth quarter cannot be read at face value.

In Q4 2025 Tamar sold 2.15 BCM, down from 2.47 BCM in the comparable quarter. Revenue net of royalties fell to $93 million from $108 million. On the surface, average price actually rose to $5.20 per MMBTU from $5.14 in Q4 2024. But the footnote to that price table says explicitly that the fourth-quarter average price includes a change in estimate of IEC's average price over the life of the contract under IFRS 15. This is not a technical footnote. It means IEC's anchor-price economics already altered the statements even before the dispute reached a final legal outcome.

So the right way to read IEC in 2025 is not merely "42% of revenue." It is the anchor layer that shapes price, recognition timing and the market's read of every quarter. If the arbitration ends close to the maximum reduction, that would not be only a commercial hit. It would also hit the estimate base that already sits inside reported revenue.

BOE: Brent Sets Direction, But Clauses Set Quality

If IEC sets the domestic anchor price, BOE determines whether Tamar export is a stable engine or an outlet with embedded flexibility. The contract is very different in character. The export agreement is Firm. Total contracted quantity is about 68.3 BCM. Supply started on June 30, 2020 and runs through December 31, 2034 or until the full quantity is supplied, whichever comes first, with a two-year extension option for either side if the full quantity has not been consumed by then.

The quantity layer is split here as well. It started with about 1 BCM per year until June 30, 2022. After that it moved to about 2 BCM per year. From the start date of the additional quantities, another roughly 4 BCM per year is added, with daily quantities ranging between 350 MMSCF and 450 MMSCF. On top of that, the buyer may also purchase spot quantities.

On paper this looks like a straightforward growth engine. In practice the contract is written far more carefully. The start date for the additional quantities was July 1, 2025, but it can be delayed by up to 90 days if the expansion works are not completed, and can be delayed further in a force-majeure case. In practice Tamar partners notified BOE that they estimated the additional quantities would be pushed into Q1 2026. More importantly, inability to transfer the additional quantities in practice because of lack of capacity or infrastructure availability does not count as a breach. So even after there is demand, and even after there is a contract, and even after there is nominal quantity, the path to more cash still depends on external infrastructure.

This matters because the BOE contract does not just sell gas. It defines the quality of monetizing added capacity. Price is based on a Brent-linked formula with a floor. At first glance that offers downside protection. But the same agreement also says that if average Brent in the contract year drops below $50, the buyer may reduce the annual minimum quantity, excluding the additional quantities, to 50% of the contracted annual amount. In other words, the floor protects unit pricing, but below a certain Brent level it no longer fully protects billed volume.

And that is not the end of the flexibility. The contract includes two price-reset windows, after year five and after year ten. In each window price can move up or down by up to 10%. If the parties do not agree on the reset, BOE may reduce the quantity it committed to buy by up to 50% at the first reset, excluding the additional quantities, and by up to 30% at the second reset for all quantities. During 2025 the parties agreed not to implement a price update in the first reset window, but the mechanism itself remains important. It means BOE does not only hold a pricing option. It also holds a volume option if pricing negotiations fail.

That chart organizes the argument. In 2025 domestic-market revenue actually rose to $319.5 million from $307.5 million. The damage came from export revenue, which fell to $187.8 million from $216.7 million. Total gas sold barely changed, 10.05 BCM versus 10.09 BCM, but export volume fell to 3.27 BCM from 3.41 BCM and average pricing weakened. So even before looking at the full upside from the additional quantities, it is already clear that BOE is not only a growth outlet. It is also the place where 2025 monetization quality deteriorated.

Another layer that sharpens the point is the delivery location. Gas is delivered at the Natgaz-EMG connection near Ashkelon, and since March 2022 also at Aqaba. If Nitzana is added later as a delivery point, price is adjusted for the additional transportation costs borne by BOE. So even when the geographic route improves, the economics can still change through price adjustments rather than through a simple margin lift.

In other words, BOE does not "set Tamar gas price" only in the narrow sense of unit pricing. It determines whether Tamar's incremental capacity becomes firm high-quality export sales, or sales that remain dependent on Brent, reset windows, quantity-reduction rights and the availability of export infrastructure outside Israel.

Who Really Sets Tamar Pricing Economics

If one concise answer is needed, it is this: IEC sets the anchor price, BOE sets the quality of the expansion.

IEC matters more for the near-term read of 2025 and 2026 because the dispute is live now, because it represented 42% of 2025 revenue, and because its influence also flows through revenue-recognition mechanics. BOE matters more for the medium-term upside because that is where the answer sits on whether more capacity, more export and more infrastructure actually become contracted volumes at durable economics.

So anyone looking for "the Tamar gas price" as one single variable is missing the core point. Tamar does not have one price. It has a domestic anchor price, an export price linked to Brent with a floor, and quantity clauses that determine whether downside is only partial or turns into a real volume giveback. 2025 showed that the local contract is not settled and the Egyptian contract does not offer clean upside. Isramco's pricing economics are set by both contracts together, just not in the same way.

That also leads to the key conclusion for the next 2 to 4 quarters. If the IEC arbitration ends without a material hit to price, and if BOE starts taking the additional quantities without another infrastructure delay and without moving into the quantity-reduction mechanisms, Isramco will be able to argue that Tamar's new capacity has actually become better economics. If one of those two axes breaks, more volume on its own will not be enough.

Conclusions

The main article argued that Isramco's bottleneck is not only about physical capacity. This follow-up shows why. IEC is where the domestic anchor price sits, and where the central legal and accounting dispute now sits as well. BOE is where export quality sits, meaning the question of whether Brent linkage, floor protection and quantity flexibility will let the partnership benefit from Tamar's expansion or merely live with higher volumes on softer terms.

Current thesis in one line: IEC determines the baseline price through which the market reads Isramco, while BOE determines whether the added export capacity is actually worth good money.

What changed: 2025 made it clear that Tamar pricing has moved away from the question of "how much gas can be produced" and toward "under which contracts, at what price and with what quantity flexibility is it sold."

The counter-thesis: this read may be too strict because both contracts still include floor protection, extension mechanisms and customers that the partnership considers low credit-risk counterparties. If Brent stabilizes, the IEC arbitration lands somewhere balanced and infrastructure is delivered on time, these contracts can still look materially stronger than they do now.

What could change the market interpretation: an early signal from the IEC arbitration, actual start of the additional quantities to BOE without another delay, and proof that reported pricing in coming quarters is driven more by commercial economics than by estimate changes.

Why it matters: because at Isramco the question is not only how much gas Tamar holds, but who controls price, quantity and the timing through which revenue becomes accessible cash.