Prime Minister Benjamin Netanyahu is not trying to fool us when he warns us that Israel's natural gas will be left in the ground if no agreement is signed with the gas companies. He really believes it. Netanyahu knows of more than a few examples of countries who drove international companies away from their gas fields, only to beg them to return. Is this what will happen with US company Noble Energy, the only entity capable of developing and operating the gas reservoirs? Will Noble Energy abandon the reservoirs and summon Israel to international arbitration? That is by no means sure.
Noble Energy has a lot to lose here. It owns the Tamar gas reservoir, one of the best cash cows of its type in the world, which is providing a regular and stable stream of dollar-linked revenue. It owns the Leviathan reservoir, double the size of Tamar, in which it has already invested hundreds of millions of dollars. Furthermore, Israel also has major legal claims against Noble Energy that for some reason have hitherto not been used. Why, for example, is Israel not accusing Noble Energy of violating the ownership agreement, in which the latter committed itself to clear timetables for developing the reservoir? It can be assumed that Noble Energy, a respectable public company, will find it hard to explain to its shareholders why it is apparently violating this agreement - if someone in the government only bothers to make this argument.
It is also possible that Noble Energy is playing for time. Global liquefied gas prices have plummeted by over 50% over the past year. Profits from Noble Energy's US oil fields have plunged. The export deals for Leviathan and Tamar are starting to look shaky: the major customers in Egypt are taking a hard line or have halted the negotiations. It is by no means certain that Noble Energy is currently capable of financing the $5 billion cost of developing the Leviathan reservoir. It is very possible that Noble Energy has an interest in delaying its plans until gas prices recover. Is the government aware of these possibilities?
Netanyahu's order to conclude the negotiations within a month proves that none of this interests him at all. He is unwilling to take a chance, and is hoping with all his might that the Leviathan reservoir is developed. Not just to satisfy the Republican senators in the US calling him up to plead Noble Energy's case, and not just to ensure additional sources of supply for the economy and billions in tax revenues for the state treasury. Netanyahu desires gas as a geopolitical card that he can use in his contacts with rulers in the vicinity. Is King Abdullah mad at us? Let's see how we can help him with gas - the Jordanian Electric Power Company really needs it. Does el-Sisi want to talk about cooperation? Maybe we'll get together and sell gas to the Europeans. Do the Turks want Iranian gas? What for? It's much better for them to buy Israeli gas. In Netanyahu's great game, there's no room for the little gas consumer.
Published by Globes [online], Israel business news - www.globes-online.com - on June 17, 2015
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