Edison stops gas exploration in Israel

Offshore Israeli gas rig Photo: IDF Spokesman

The market sees the decision as proof that gas exploration in Israel is not attractive due to restrictions on gas exports.

Italian company Edison, owned by a French group, one of the oldest foreign investors in the Israeli gas exploration market, has closed down its activity in Israel in recent weeks. The market is interpreting the decision as proof that gas exploration in Israel is not attractive and that the restrictions on gas exports imposed by the Tzemach Committee should be eliminated. Government sources argue that the company closed its office because of strategy changes, not because of anything involving the Israeli market.

Edison's office, managed by Octavio Viglione, was active in Israel for five years and was closed two months ago. As far as is known, the company is maintaining its connection with Lavi Capital, managed by former Ministry of Finance director general Yarom Ariav, which provided it with consultation services and representation for years. As of now, Edison is continuing its activity in the Royee license in which it is a partner with Israeli partnership Ratio Oil Exploration (1992) LP (TASE:RATI.L).

Edison's last significant act in Israel was competing for the Karish and Tanin licenses sold by Delek Group Ltd. (TASE: DLEKG) as part of the implementation of the natural gas plan. In the final pricing of the licenses, Edison lost out to Greek company Energean, which made a more aggressive bid of $150 million for the rights to the reservoirs.

After losing the contest for Karish and Tanin, Edison refrained from any further activity in Israel and did not participate in the licenses tender conducted by the Ministry of National Infrastructures, Energy, and Water Resources in the second half of 2017 in which Energean won five more licenses and a consortium of Indian companies won the sixth license.

An Israel source connected to the company said that the Tzemach Committee's restrictions on gas exports had chilled Edison's enthusiasm for doing business in Israel. The source referred mainly to the decision obligating every owner of a reservoir to hook up to the Israeli coast and another decision restricting the quantity of gas exported from each reservoir to 50% of the gas in the reservoir.

"People doing gas exploration now know that should their drilling succeed, they will be saddled with a $1.5 billion burden - the cost of connecting a deep water reservoir to the coast - and will also be able to sell only 50% of the gas, because no one in Israel will buy the gas," the source claimed.

Published by Globes [online], Israel business news - www.globes-online.com - on August 6, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Offshore Israeli gas rig Photo: IDF Spokesman
Offshore Israeli gas rig Photo: IDF Spokesman
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