Delek Drilling, a partner in the Tamar natural gas reservoir and a unit of Yitzhak Tshuva's Delek Group Ltd. (TASE: DLEKG), notified Competition Commissioner Michal Halperin yesterday evening that it was "nullifying" its right of veto in the partnership, a right that enables it to prevent other partners in the reservoir from making contracts to supply gas from it. The notice came shortly after Halperin threatened to impose personal administrative sanctions on Delek Drilling managers because the veto was not being removed.
Delek Drilling holds 22% of the rights in the Tamar reservoir. Under the outline plan for Israel's gas industry, intended to enable the development of the larger Leviathan reservoir to proceed, Delek Drilling is obliged to sell its rights in Tamar by the end of 2021. According to an opinion published by Deputy Attorney General for Economic Matters Meir Levin, Delek Drilling may not exercise its veto right against its partners.
In the same opinion, Levin wrote that Chevron, which operates the reservoir and owns 25% of the rights in it (as a result of its acquisition of Noble Energy), should be forbidden from exercising its veto, but that this prohibition would only come into force once Delek Drilling completed the sale of its holding in Tamar.
Delek and Chevron oppose an agreement for the sale of gas to Israel Electric Corporation (IEC) signed by the other partners in the Tamar Reservoir, which together hold 53% of the rights in it. The reason for their opposition is the competition between Tamar and Leviathan, in which Delek Drilling and Chevron hold 85% of the rights. The price in the agreement is $3.7-4.4 per MMBtu, considerably less than the price that IEC currently pays for gas that it buys from Tamar under an agreement from 2012: $6.35 per MMBtu.
Halperin set a deadline of 30 days for Delek Drilling to remove its veto on the deal with IEC. Delek Drilling's notice to her yesterday ends that chapter, and puts the spotlight on Chevron.
Government sources told "Globes" yesterday, "Delek Drilling needs to sell its holding in Tamar by the end of 2021, and will presumably prefer not to wait until the last minute, so that it sees itself as a very temporary player. For Noble Energy/Chevron on the other hand, relinquishing the veto right is a drama, and so it is important that both Noble Energy and Delek should understand that the Competition Authority has no intention of conceding on this matter."
Published by Globes, Israel business news - en.globes.co.il - on October 14, 2020
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