Karish, Tanin to be sold within 2 years

Tamar gas drilling

The natural gas partners will sell the reservoirs within 18 months; otherwise, a trustee will do it.

The Karish and Tanin natural gas reservoirs will be sold within two years, according to a compromise reached following marathon meetings between the state and the gas companies. The meetings began yesterday and continued today.

The gas companies are undertaking to sell the reservoirs within 18 months. If they are not sold by then, they will be assigned to a trustee, who will sell them within six months. This compromise solves an important dispute between the parties. Italian gas company Edison S.p.A is making it clear that it will be unwilling to buy the reservoirs if they are not sold in the coming months.

The political-security cabinet will convene tomorrow to confirm that the political-security issue involved justifies bypassing Antitrust Authority director general Prof. David Gilo. This discussion was preceded by dozens of meetings between the gas companies and the state in recent weeks for the purpose of solving the disputed issues. One substantive issue on the agenda that has apparently been solved is the question of gas prices. The state and the gas companies have agreed that price of gas in Israel will be a weighted average of all the prices in the existing gas contracts - what the gas companies are calling the "Israeli Hub." For example, the average gas price in the first quarter of 2015 was $5.44 per mmbtu. As reported in "Globes," progress on this issue took place only yesterday, when Noble Energy (NBL) accepted the state's demand to include in the plan an option for separate marketing from the huge Leviathan reservoir 10 years after it is developed.

According to the gas companies, they are willing to accept separate marketing from Leviathan in the future if the state first assesses the feasibility of separate marketing and how the model will be implemented. A third material dispute concerned the timetable for selling Karish and Tanin. While the state sought a quick sale within 18 months, the gas companies insisted on three years. It now seems that the gas companies have given way on this demand, and are willing to settle for a sale in two years. Not everyone, however, will be satisfied with this timetable.

According to Edison, the leading candidate for buying the two reservoirs, a sale of Karish and Tanin must either take place in the next few months, or it will not be willing to buy them at all. The company says that a time period of a year is too long. Edison, a subsidiary of Electricite de France (EDF), France's national energy company, is considered a drilling operator of the same caliber as Noble Energy. Among other things, the company holds the Neta and Royee licenses, together with Ratio Oil Exploration (1992) LP (TASE:RATI.L) and Israel Opportunity. The company negotiated for months with Delek Group Ltd. (TASE: DLEKG) and Noble Energy to buy Karish and Tanin at a time when Gilo had agreed to exempt Delek and Noble from the ban on an agreement in restraint of trade if they sold the small reservoirs to a third party. Last December, however, Gilo rescinded the order on which he had agreed with the Leviathan partners, and negotiations between Noble Energy, Delek, and Edison were halted. Now, one day before the political-security cabinet convenes, the Italian company is making it clear that it will be unwilling to wait more than a few months to buy the reservoirs. The company fears that if the state does not force Delek Group and Noble Energy to sell the reservoirs almost immediately, the Tamar and Leviathan partners will sign all the gas contracts for the local economy. In this situation, the small reservoirs will have no customers left to supply gas to.

Published by Globes [online], Israel business news - www.globes-online.com - on June 24, 2015

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

Tamar gas drilling
Tamar gas drilling
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