Tamar: Production Capacity Rose While Blue Ocean Sales Depend on Export Infrastructure

Equital's quarter sharpens one issue below the headline dividend from Naphta: at Tamar, engineering progress arrived before the export route received a date for the additional volumes. The first phase of the expansion is complete, production capacity already stands at about 1.35 BCF per day, and the operator expects the third Ashdod compressor to move the reservoir toward capacity of up to about 1.6 BCF per day. Actual export sales fell, Blue Ocean sales were almost cut in half, and the start date for the additional volumes was pushed to a date that has not yet been announced. The current read on Tamar is therefore not a shortage-of-gas story. It is a transmission, equipment availability, contractor availability, and emergency gas-allocation story. Distributions approved after the end of March show that the weaker export quarter did not stop the near-term cash route. The next proof point is whether the added capacity finds an actual export path, mainly through the transmission system outside Israel and a defined timetable for Blue Ocean.

Capacity Rose And The Bottleneck Moved To Transmission

Tamar passed an important milestone in February 2026: the first phase of the expansion was completed at cumulative cost of about $640 million for the Tamar partners, with Isramco Negev 2's share at about $184 million. This is not a minor update. For a holding company like Equital, every Tamar improvement has to be read through whether it increases saleable gas volumes, distribution capacity, and the accessibility of that cash up the group structure.

The engineering layer advanced. As of the approval date of the results, Tamar's maximum production capacity stood at about 1.35 BCF per day after two of the three compressors at the Ashdod receiving terminal were upgraded. The operator expected the additional upgrade to be completed in the coming weeks and to allow daily capacity of up to about 1.6 BCF. On a quick read, that can look like the full answer.

The transmission layer separates that answer into two parts. The transmission system outside Israel was about 93% complete at the end of March, with a budget of about $176.5 million and Isramco Negev 2's share at about $50.7 million. Its expected completion date is in the second half of 2026. The Nitzana project is at an earlier stage: about $127 million had been invested by the Tamar partners by the end of March, with Isramco Negev 2's share at about $37 million, after a refund from the operator for long-lead items. Its expected completion date is in the second half of 2028. The offshore Ashdod-Ashkelon pipeline section was also pushed to the third quarter of 2026.

The implication is that reservoir capacity is advancing faster than the sales infrastructure for exports. That does not erase the value of the expansion, but it changes the order of proof: investors need to see gas reaching export customers in volumes and terms that hold over time.

Blue Ocean Sales Fell While Tamar Sold More Gas

The number that separates operating improvement from economic improvement sits in the revenue note. Tamar sold more gas in total during the first quarter, 2.76 BCM versus 2.61 BCM in the comparable quarter. The internal split tells a different story: domestic sales grew, exports fell, and revenue from Blue Ocean in Egypt declined faster than export volumes.

The gap between volume and revenue matters. Total volume rose by about 6%, while Tamar gas and condensate revenue net of royalties fell to NIS 374.6 million from NIS 437.7 million. Part of the decline came from a weaker dollar against the shekel, and another part came from a lower average export gas price following the decline in Brent until the start of Operation Roaring Lion. Tamar therefore did not only export less. It sold less through the channel where price and transmission already became key variables in revenue quality.

During Operation Roaring Lion, Leviathan and Karish stopped production, and Tamar also supplied some customers of other reservoirs. That helped preserve total sales volume, but it does not prove that additional export sales are ready. For Equital, this is the difference between an asset that shows operating flexibility and an asset that starts increasing cash through export contracts.

Blue Ocean Depends On A New Timetable And Emergency Rules

The sharpest update is not in the revenue table but in the timetable. In April 2026, the Tamar partners notified Blue Ocean Energy that force majeure had created equipment and contractor availability problems, so the start date for supplying the additional volumes was deferred to a date to be announced. That wording keeps the contract alive, but it reduces 2026 visibility: there is higher capacity, there is a material export customer, and there is still no new date for the additional volumes.

The draft emergency gas regulations add a regulatory layer to the same bottleneck. The draft published for public comments on March 26, 2026 proposes, among other things, absolute priority for Israeli domestic consumers during emergencies, so exports would be allowed only if gas remains after domestic allocation. It also proposes requiring any gas supplier that can actually supply gas to sell to consumers without a binding contract up to its full production capacity, at a price no higher than the average price published by the Natural Gas Authority. The text is not yet binding, and Chevron submitted comments on behalf of the Tamar rights holders. The draft itself is enough to remind investors that export infrastructure is not only a pipe-and-contractor issue. During emergencies, the right to export may come after domestic needs.

That is why Tamar's next read should focus on three dates, not one capacity number: completion of the third Ashdod compressor, completion of the transmission system outside Israel in the second half of 2026, and a new date for Blue Ocean's additional volumes. Nitzana remains the longer-term upside layer, with an expected completion date in the second half of 2028.

The Delay Did Not Stop Distributions, It Delays Export Proof

Events after the balance sheet date prevent the story from turning too negative. Isramco Negev 2 approved a distribution of about $70 million in May 2026, and Naphta approved a NIS 200 million dividend, of which Equital's share through Yoel is expected to be about NIS 177 million. Isramco Negev 2 also entered into an economic hedge in April on NIS 22 million against dollar weakness. In other words, the decline in export sales during the quarter did not break near-term distribution capacity and did not turn Tamar into a short-term cash problem.

The distributions do not prove that the expansion is already fully working. They say Tamar is still generating enough cash to support distributions while the main growth route through exports remains under construction. The current conclusion is therefore narrow: Tamar advanced on capacity, and that progress already supports value at the Naphta and Isramco layers, but the added value from Blue Ocean will count only when the additional volumes receive a date, the transmission system outside Israel is completed, and emergency regulation does not push exports behind domestic needs when the local system needs gas. Until then, Equital benefits from an improved asset, not from full proof that the improvement has already become export sales and additional cash moving up the group.