Ministry to raise minimum gas license stake to 20%

Criticism followed dry holes drilled by operators with just 5% of license rights.

The Ministry of National Infrastructures plans to raise the minimum holding in oil and gas licenses to 20%. The measure is in response to the widespread criticism that Israel allows ephemeral companies to operate offshore wells. The criticism intensified following the string of dry holes drilled by well operators that owned just 5% of the license rights.

The criticism argues that, in addition to the lack of experience and skills, the well operators had no incentive to discover gas because they were not required to invest equity and would not benefit from revenue in the event of a discovery.

In most countries, well operators own at least 30% of a drilling license and share proportionately in expenses and profits. Noble Energy Inc. (NYSE: NBL), which discovered all of Israel's offshore gas fields, owns at least 30% in all the licenses.

Israel has argued that foreign companies were not prepared to come to the country if it raised the rights threshold above 5%. Well operators that agreed to come included the Indian unit of Canada's GeoGlobal Resources Inc. (Bulletin Board: GGGR), which has an annual turnover of a few hundred thousand dollars, and Azerbaijan's Caspian Drilling Company Ltd.

In October 2013, the Ministry of National Infrastructures notified the Yam Hadera and Gabriella licensees that it intended to raise the rights of the well operators, but never announced the new threshold.

Published by Globes [online], Israel business news - - on February 11, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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