Alon Natural Gas Exploration Ltd. (TASE: ALGS) must pay the entire 11.5% royalties worth tens of millions of dollars from the Tamar gas field to Isramco unit Nafta. The arbitrator, retired Supreme Court Judge Theodore Orr, accepted Isramco's appeal against a previous arbitration decision in January 2019, which said that Alon did not have to pay the full royalties.
In 2013, Nafta and the Israel Oil Co. (which merged into Isramco in 2016) demanded that Dor Gas (today controlled by Alon Gas) pay them royalties of 11.5% out of their 5% stake in the Tamar gas field. Dor Gas rejected the demand and claimed that royalties need only be paid from 0.8% of their rights in the Tamar field, subsequently reduced that claim further to 0.39% of their rights in the field.
The matter went to arbitration and in January 2019 Judge Boaz Okun ruled that Alon Gas must pay the full 11.5% royalties on its Tamar holdings to Isramco. However, Okun ruled that Isramco would pay back 11.5% super-royalties on 1.6% of the gas field. This meant that Alon had to pay Isramco unit Naphta $9 million per year over the next few years and $5 million per year for 15 years from 2024.
Isramco appealed this decision to Judge Orr who has now ruled that Alon Gas must pay the full royalties, cancelling Isramco's need to contribute.
Isramco was represented in the case by Advs. Zvi Firon, Ran Firon and Danny Frieman from the M. Firon & Co. law firm and Adv. Amir Avitsan.
Published by Globes, Israel business news - en.globes.co.il - on March 24, 2020
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