Delek Group has been listed on the Tel Aviv Stock Exchange since 2000 (TASE: DLEKG) and very recently has listed its shares on the OTCQX bulletin board in the US (OTCQX: DGRLY). 64% of shares are controlled by Mr Isaac Tshuva, one of Israel's most well renowned entrepreneurs. The remaining shares are publically floated.

Driving an energetic agenda
Delek Group today is a leader in both downstream and upstream energy provision. In the downstream, Delek manages over 1,600 gas stations and convenience stores across the United States, Europe and Israel. Through three major subsidiaries in retail energy – Delek Israel Fuel Corporation Ltd., Delek US Holdings, Inc. and Delek Europe Holdings Ltd.

Over the years, Delek has grown to command a 23% market share of the local Israeli service and convenience station market, with approximately 240 gasoline stations.

In Europe, Delek owns 869 gas station & convenience stores that it purchased in 2007 in the Benelux region from Chevron-Texaco through the auspices of its Delek Europe subsidiary (in which Delek Group enjoys a 80% holding). More recently, Delek Europe announced that it was in the process of purchasing BP’s Retail & Convenience store business in France.

Delek US (NYSE: DK), Delek Group's US subsidiary manages over 500 gas stations and convenience stores, and operates a 60,000 barrel per day oil refinery in Tyler, Texas.

2009: Drilling down to a future with a bright upside
Enabling greater energy independence has long been a national goal for Israel. It has also been an ongoing quest driven by Delek Energy Ltd., the oil and gas exploration & production (E&P) arm of the Delek Group.

Between 1999 and 2000, Delek Drilling LP and Avner Oil Exploration LP (indirect subsidiaries of Delek Group) discovered vast and commercially viable quantities of natural gas in two fields off the Israeli coast (known as Noa & Mari-B). The natural gas reserves in those two fields, estimated at approximately 32 billion cubic metres (BCM), marked the first crucial breakthrough in locating this precious resource locally. Over half of the production of these gas fields has been committed to the Israeli Electric Corporation, while the remainder will be produced for private clients including Israel Chemicals Ltd.

In early 2009, Delek Drilling & Avner, along with its partners, discovered a second significant gas reservoir, known as Tamar, off the Northern coast of Israel. The natural gas quantities contained in this discovery were estimated at 240 BCM approximately five times larger than the amount found in Mari-B and Noa. Delek had successfully tapped into a vast natural  gas source that would favorably tip the scales of the energy market towards energy independence for Israel for the foreseeable future.

Tel Aviv Insider had the opportunity to discuss some of the events of the past year with Asaf Bartfeld, President & CEO of Delek Group:

What sort of domino effect will the Tamar field discovery have on the energy delivery chain and how does it stand to affect our everyday lives?

The discovery of significant offshore natural gas deposits is far more than just a watershed event in Delek’s history; it’s a breakthrough event that will impact the Israeli energy market and the entire country’s economy for years to come.

Look at the unprecedented tariff decrease just announced today by the electric company (approximately 10% for residential customers and 16% in the industrial sector). This is a direct reflection of the fact that since 2004 our Yam Tethys reserve has been providing cost-effective natural gas which has enabled the electric company to reduce its dependency on imported coal.

Once Tamar becomes operational, Israel will be well on its way to becoming a self-sufficient, gas-based energy market. It will significantly enable the country to increase its cash reserves of foreign currency, reduce our dependency on fossil fuel by-products, and finally provide our country with that elusive natural resource treasure we have dreamed about since the founding of the state. And of course, the introduction of a clean substance to generate the energy needed for the country’s power grid is in line with adopting greener fuel policies.

Will it have an impact on other sectors as well?

Certainly. Any heavy industry that relies on coal-based power generation comes under scrutiny for its carbon footprint. Imagine a reality where these emissions are significantly reduced – and through a more cost-effective and environmentally-friendly fuel. It’s a win/win situation for everyone. It also has significant bearing on water desalination, another core business of Delek and a process which consumes a lot of fuel. Using gas will clean up the process and enable us to produce greater amounts of desalinated water.  

What are the necessary steps in taking the Tamar field discovery from the development stage to market delivery? How prepared is Delek to meet the challenge?

The Tamar and Dalit field discoveries are being primed for accelerated development, and financing and structural plans are currently moving forward to make them working sites. We need to build an offshore site, lay approximately 100 km of pipeline from the site to the coast and build a receiving station. Currently, all indications would seem to point to the realization of an operational supply of natural gas from these sites by 2012.

What will Delek’s role be in the delivery chain once the gas begins to be harvested for commercial purposes?

Delek has a strong record in both upstream and downstream energy, and we want to leverage both in this instance. Clearly, we are primed to become the greatest supplier of natural gas in the country, but we’d also like to be one of the utility companies that deliver it. We already have one gas-powered electric plant in Ashkelon that services our desalination business there and we hope in years to come to compete with the electric company in retail and industrial markets as the industry begins to open up to the private sector.

Can we expect to see the Delek Group eventually migrate its core fossil fuel business to a new and cleaner energy sector? Are Delek Electric Charge stations, for example, a reasonable scenario for the future?

I don’t see our core activities in the energy sector shifting in focus anytime soon, but in line with all of our exploration efforts and in light of the headway we have made on the natural gas front, we certainly have shown that we are constantly looking to grow and pursue promising opportunities as they arise. I think if the plans for electric powered vehicles move forward, become viable and there is a genuine market demand for it, Delek will certainly want to be there.

Looking ahead to 2010, what growth areas do you foresee for the Delek Group, both in Israel and abroad, beyond the natural gas sector?

I think the momentum and continued positive flow of verification reports surrounding the natural gas discoveries should bode extremely well for the Group’s performance in the coming year. In addition to work on the Tamar and Dalit sites, there is another potential sea-based natural gas reserve that is undergoing final seismic testing in anticipation of future drilling and exploration.

In the infrastructure sector of the Group’s activities, the IDE water desalination subsidiary continues to be a strong and exciting business for us as it continues to expand as a market leader having won a number of mega projects around the world in the last couple of years. And of course, we are committed to strengthening our position in the retail gas station and convenience store market and in fortifying our leadership in the automotive sector through Delek Motors.

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