Steinmetz to pay Langotsky NIS 50m compensation for Tamar

Beny Steinmetz's Scorpio will pay geologist Joseph Langotsky NIS 50 million for damage relating to missing out on the Tamar natural gas discovery.

Geologist Dr. Joseph (Yossi) Langotsky won a big victory against Beny Steinmetz. Judge Emeritus Boaz Ocon today ruled that Steinmetz's company, Scorpio Real Estate Ltd. (TASE: SCRP.B1) will pay Langotsky NIS 50 million for damage relating to their partnership in the Tamar natural gas partnership and Langotsky's loss of his share in it, just before the multibillion dollar gas discovery.

Huge quantities of natural gas have been discovered in Israeli waters since Langotsky, the first man to explore for gas in the Tamar area, and Steinmetz joined forces and named the well for Langotsky's granddaughter. In 2008, Scorpio announced that it was abandoning the project. After Langotsky failed to find a new investor, and because of his limited funds, he lost control of the rights to the well. Shortly afterwards, in January 2009, the Tamar gas discovery, worth an estimated $8 billion, was announced.

Langotsky sued Scorpio for $100 million, claiming that its quitting the project at such a late stage contravened their agreement and resulted in the loss of his share in it. He also claimed that Scorpio blocked the entry of an alternative partner, increasing the damage to him. He claims that Steinmetz wanted the new partner to pay Scorpio's investment in it as well as the planned investment, thereby blocking a deal.

The case ended up in arbitration under Judge Ocon, who, in December 2011, ruled that Scorpio violated the contract with Langotsky by ignoring its duty to help him find an alternative investor and by announcing that it was abandoning the project at a timing which prevented him from finding an alternative investor. However, the judge rejected Langotsky's claim that he was waiting for Scorpio's decision, which caused him to miss a sure opportunity to get rich.

"Langotsky's description is incomplete," wrote Ocon in his interim ruling, saying in flowery language, "Langotsky's attempt to present himself as a kind of Tantalus, who was sentenced to stand beneath a fruit tree near water, without being able to eat or drink, was overblown. Scorpio's announcement that it was quitting was received with a real delay, but there was no fruit and no water the environment where Langotsky was in, and the investors he could have found, even if he had been notified, were not guaranteed."

In that decision, Judge Ocon hinted at today's ruling, which accepted part of Langotsky's claim. "The law recognizes the right for compensation even in situations of 'circumstantial ambiguity'. One of the noteworthy cases is the damage to an opportunity to make an alternative deal. In such cases, there is the possibility of 'probability compensation', which will reflect the chance which was taken from the person harmed, even if the chance was less than 50%," he wrote.

In other words, the compensation awarded to Langotsky is the probability compensation calculated by Judge Ocon on the basis of two prior rulings: One, the probability of a discovery in the gas prospects when the agreement was written, or at the date it was breached; and two, the chances of Langotsky finding an alternative investor, despite the breach of contract by Scorpio in 2008, a year in which the global economy was in severe crisis, and it was very hard to find investors.

The Tamar license - and discovery - is now owned by Noble Energy Inc. (NYSE: NBL), Delek Group Ltd. (TASE: DLEKG), Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), and Alon Natural Gas Exploration Ltd. (TASE: ALGS).

Published by Globes [online], Israel business news - www.globes-online.com - on July 3, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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