Israeli gov't officials mull gas fields compromise

Leviathan
Leviathan

Noble Energy is refusing to compromise on its Tamar and Leviathan gas holdings but Delek is more flexible.

Just before the final decision by Antitrust Authority head Prof. David Gilo on declaring if the Leviathan natural gas reservoir is a cartel, decision-makers in Israel's energy sector face a dilemma. Should they offer the gas developers a package deal, a compromise that will instantly solve all the disputes interfering with the development of the natural gas reservoirs, or to continue on the "safe" course leading to a confrontation with the developers in the antitrust court. The current compromise proposals on the table involve the Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, selling its rights in the Tamar reservoir, while leaving the US partner, Noble Energy, with its holdings in both reservoirs (with the possibility of diluting its rights in the Tamar reservoir). At the same time, mechanisms are being examined for ensuring that Noble Energy does not take an active part in negotiations for the sale of gas to the domestic market, which will, at least ostensibly, create competition between Isramco in the Tamar reservoir and Delek Group and Ratio Oil Exploration (1992) LP (TASE:RATI.L) in the Leviathan reservoir. A comprehensive agreement within the government on such a compromise proposal, however, is still far off.

The path leading to the "end of the conflict" depends on achieving a broad consensus among all the regulators dealing in the sector: the Antitrust Authority, the Ministry of Finance budget department, the Ministry of National Infrastructure, Energy, and Water Resources, and the Public Utilities Authority (Electricity) - just to mention the first ones that come to mind. Beyond this, the question arises of what status and validity such an agreement will have - whether it will be binding on the next government in a way that will create certainty in a sector with strategic importance for the economy and the nation.

Tshuva's flexibility, Noble Energy's refusal to compromise

As of now, it appears that the second question is simpler. Gilo has full authority to reach a compromise with the gas developers, regardless of the elections. He is entitled to issue a new consent decree, and he will receive approval from whatever new government is elected. Gilo can issue a consent decree at the end of the hearing for the gas companies that will be effective two days later (for Noble Energy on Tuesday, for Delek Group on Wednesday, and for Ratio on Thursday). The antitrust laws put no time constraints on Gilo, which is, by the way, a topic worthy of separate discussion.

The answer to the first question is much more complex. An agreement ending the dispute at this stage will have to forego at least the imposing of controls on gas prices in order to give competition a chance. The Public Utilities Authority (Electricity) will have to agree to a settlement on the subject of the gas agreements and prices. The Petroleum Commissioner will have to approve the development plan for the Leviathan reservoir. The deputy Attorney General will have obviously have to provide a legal sanction for the entire package. Another party, possibly less important, but not less essential for attaining a compromise agreement, is the developers themselves.

Tshuva, the more easygoing of the partners, is willing to sell his holdings in the Tamar reservoir, but refuses to sell the Tanin and Karish reservoirs. Noble Energy, on the other hand, is not willing to concede anything. The Texas company is refusing to sell, or even dilute, its holdings in either of the two gas reservoirs. Noble Energy's stubbornness, compared with Tshuva's flexibility, is explainable as follows: Tshuva's investment in Tamar is essentially financial, and he now senses a rare opportunity to sell off his rights. The reason is the global crisis in the oil and gas exploration industry resulting from plunging oil prices. The sophisticated investors realize that this crisis is expected to generate once-in-a-lifetime acquisition opportunities for those with cash. Noble Energy also realizes this, but the US company has its own reasons for refusing to sell its rights.

First of all, Noble Energy is different from Tshuva in character. It looks at its investments from a far more long-term perspective. Secondly, Noble Energy no longer trusts Gilo, and does not believe that agreements with him are of any value. Thirdly, after investing its best technology in the Tamar reservoir, Noble Energy finds it difficult to bear the thought of this infrastructure being given to a competitor. Fourthly, the US company believes that it has a strong legal case against Gilo, and that there is no reason for it to give its bête noire in advance what he could get only under the company's worst case scenario. The only way it will agree to withdraw from the Tamar reservoir is in an expropriation proceeding, which will involve payment of enormous compensation.

Internal conflict in the government

The confrontation with Noble Energy is arousing an internal dispute in the government. On the one hand, the thought of Americans dictating terms to the Israeli government sets on edge the teeth of more than a few senior officials. On the other hand, even the hottest head understands that it will be very difficult for Israel to find a company of Noble Energy's caliber, even if the latter is excluded from Tamar, or abandons the reservoir voluntarily. Just to be safe, government officials in recent weeks have put out feelers to examine the feasibility of bringing a serious energy company here - a pathetic attempt that resulted in predetermined failure.

Meanwhile, it appears that a decision is being delayed. No government minister can interfere with the professional discretion of officials, and they will find it difficult to agree between themselves on the government's stance.

Published by Globes [online], Israel business news - www.globes-online.com - on January 25, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Emiliano Calemzuk  credit: PR CEO and "investor group" buying out Reshet 13

CEO Emiliano Calemzuk and the other investors will hold 74% of the television channel, while Len Blavatnik’s Access Industries and WBD will remain with 26%.

Inflation  credit: Tali Bogdanovsky Unexpectedly low February CPI reading cuts inflation

While inflation in Israel in the 12 months to the end of February 2025 is lower than forecast, housing prices continue to rise.

Yitzhak Tshuva credit: Gidon Levy and Tali Bogdanovsky Competition Authority allows Delek takeover of Isracard

The Competition Authority is considered the easier of the two regulatory hurdles that the deal must overcome, the other being the Supervisor of Banks.

David Amsalem  credit  Noam Moskowitz, Knesset Spokesperson's Office Rafael to pay state NIS 444m dividend

The minister in charge of the Government Companies Authority, David Amsalem, has approved the payment by the defense company.

Barak MX air defense system  credit: IAI IAI profit jumps 55%

Israel Aerospace Industries posted a net profit of $493 million for 2024, and ended the year with an all-time high orders backlog of $25 billion.

A TSG system in tactical use  credit: PR TSG signs cooperation agreement with US defense co

The agreement includes the integration of TSG's advanced technologies into sensor-based defense systems, which will be integrated into the operational systems of US defense units.

Bria CEO Yair Adato credit: Kseniia Poliak Israeli visual generative AI co Bria raises $40m

Bria’s Visual Generative AI platform empowers businesses to create predictable, controllable, and on-brand content that aligns with their visual language.

Amnon Shashua and Aviram Ziv credit: Eyal Izhar OrCam stymied by investor dispute with Shashua

Demands by institutional investors are blocking the visual and hearing impairment device developer's recovery plan.

Work on the Green Line credit: Bar Lavi Egged wins tender to operate TA light rail Purple, Green Lines

NTA awarded the tender to Egged, which already operates the Red Line, despite government ministry opposition to one operator for the entire network.

Gabi Seroussi illustration: Gil Gibli Board chooses Seroussi as IAI chair as Erdan freezes candidacy

Israel Aerospace Industries board chose Gabi Seroussi as chair even though he did not to go through the preliminary process of the Government Companies Authority appointments review committee.

Bavli Park penthouse credit: Eyal Tagar Tel Aviv Park Bavli penthouse sells for NIS 43m

A 44th floor penthouse in one of the two towers in businessman Yitzhak Tshuva's Park Bavli project has been bought by an Israeli businessperson.

El Al aircraft  credit: Yoav Yaari El Al pilots receive nearly NIS 250,000 bonus each

Thanks to the agreements signed with the unions in 2018, El Al's employees as well as senior management share in last year's success.

Pentera CEO Amitai Ratzon credit: Eyal Izhar Israeli security validation co Pentera raises $60m

Pentera's platform enables security teams to analyze complete attack paths, identify root causes, and prioritize remediation for effective risk reduction.

Tel Aviv credit: Shutterstock Supply of unsold new homes hits record

Israel's real estate market is sliding into recession with 78,000 unsold new apartments in January, the Central Bureau of Statistics reports.

D&B chairman Doron Cohen and Meitar partner Dan Geva Meitar reclaims title of Israel's biggest law firm

Meitar has first place with 537 lawyers, followed by Herzog Fox Neeman with 512 lawyers, according to the latest Dun's 100 rankings.

First International Bank of Israel CEO Eli Cohen  credit: Eyal Toueg First Int'l posts top return on equity

First International Bank of Israel's return on equity in 2024 was 19%, the highest among Israel's banks.

Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018