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In Israel, Antitrust Regulator Reviews Natural Gas Development In Israel, Antitrust Regulator Reviews Natural Gas Development
(about 4 hours later)
LONDON — Israel’s fledgling natural gas industry was rattled on Tuesday over a threat by the country’s antitrust regulator to break an American-Israeli group’s hold on the country’s gas resources. LONDON — Israel’s fledgling natural gas industry was rattled on Tuesday over a threat by the country’s antitrust regulator to break an American-Israeli group’s hold on the country’s gas resources.
Israeli officials and the antitrust regulator have said that they are concerned that Noble Energy, a Houston-based oil company, and its partners, Delek Drilling and Avner Oil Exploration, had a lock on Israeli gas production.Israeli officials and the antitrust regulator have said that they are concerned that Noble Energy, a Houston-based oil company, and its partners, Delek Drilling and Avner Oil Exploration, had a lock on Israeli gas production.
Noble and its partners produce nearly all of Israel’s gas from an offshore field called Tamar, and that gas is used to generate about half of the country’s electric power. They are also developing an even larger field, Leviathan.Noble and its partners produce nearly all of Israel’s gas from an offshore field called Tamar, and that gas is used to generate about half of the country’s electric power. They are also developing an even larger field, Leviathan.
Together, Nobel estimates that the Leviathan and Tamar fields hold more than 800 billion cubic meters of gas, enough to meet current Israeli demand for about a century. With such a wealth of gas, the companies and the government are backing plans to also export gas to Israel’s neighbors.Together, Nobel estimates that the Leviathan and Tamar fields hold more than 800 billion cubic meters of gas, enough to meet current Israeli demand for about a century. With such a wealth of gas, the companies and the government are backing plans to also export gas to Israel’s neighbors.
Given significant reliance on the gas in Israel, the regulator is objecting to the group’s dominant position over the two fields. One worry is that Noble and its partners could overcharge for the gas, hurting consumers.Given significant reliance on the gas in Israel, the regulator is objecting to the group’s dominant position over the two fields. One worry is that Noble and its partners could overcharge for the gas, hurting consumers.
“The entry of Delek and Noble into Leviathan has created a situation in which these groups control all the gas reserves on the coast of the state of Israel,” Israel’s antitrust commissioner, David Gilo, said in a statement. Mr. Gilo said he would hold a hearing for the companies before making a decision.“The entry of Delek and Noble into Leviathan has created a situation in which these groups control all the gas reserves on the coast of the state of Israel,” Israel’s antitrust commissioner, David Gilo, said in a statement. Mr. Gilo said he would hold a hearing for the companies before making a decision.
A move by the regulator to break up the consortium would lead to further delays on Leviathan, which has already proved difficult to develop. Noble and its partners have spent years trying to find ways to finance the development of Leviathan, whose first phase could cost up to $8 billion.A move by the regulator to break up the consortium would lead to further delays on Leviathan, which has already proved difficult to develop. Noble and its partners have spent years trying to find ways to finance the development of Leviathan, whose first phase could cost up to $8 billion.
Nati Birenboim, a former adviser to the Israeli minister of energy and water, said he thought it likely that the regulator would try to force Noble and its partners to sell their stakes in Leviathan. Such a move could delay development by at least two or three years, he said, as the companies would most likely bring the decision to the courts and as new developers would have to be found.Nati Birenboim, a former adviser to the Israeli minister of energy and water, said he thought it likely that the regulator would try to force Noble and its partners to sell their stakes in Leviathan. Such a move could delay development by at least two or three years, he said, as the companies would most likely bring the decision to the courts and as new developers would have to be found.
Israel may also have a tough time finding other developers. While Leviathan represents a significant find, companies may be wary of working in the politically volatile region.Israel may also have a tough time finding other developers. While Leviathan represents a significant find, companies may be wary of working in the politically volatile region.
Mr. Birenboim, a lawyer who is co-chief executive of the consulting firm Tamuz Group, which advises business on energy matters, said that some officials in the Israeli government were opposed to the decision by the antitrust administrator, which is independent.Mr. Birenboim, a lawyer who is co-chief executive of the consulting firm Tamuz Group, which advises business on energy matters, said that some officials in the Israeli government were opposed to the decision by the antitrust administrator, which is independent.
The shortfall in tax income “is going to cost billions,” Mr. Birenboim said. “We are sending a very pessimistic message to the business market around the world.”The shortfall in tax income “is going to cost billions,” Mr. Birenboim said. “We are sending a very pessimistic message to the business market around the world.”
In his statement, Mr. Gilo said he was aware that his “determination could have consequences for the economy.”In his statement, Mr. Gilo said he was aware that his “determination could have consequences for the economy.”
The current plan, supported by the United States government, is to sell the gas to Jordan and Egypt through long-term arrangements that could help cement existing peace agreements between Israel and the two Arab countries. The Noble-led group has reached preliminary deals to export substantial quantities of Leviathan gas to Jordan and to liquefied natural gas facilities in Egypt. Changing owners could put these agreements at risk.The current plan, supported by the United States government, is to sell the gas to Jordan and Egypt through long-term arrangements that could help cement existing peace agreements between Israel and the two Arab countries. The Noble-led group has reached preliminary deals to export substantial quantities of Leviathan gas to Jordan and to liquefied natural gas facilities in Egypt. Changing owners could put these agreements at risk.
In an interview with Israel Radio on Tuesday, Gideon Tadmor, the chairman of Delek Drilling and the chief executive of Avner Oil, said that those deals were in Israel’s interest.In an interview with Israel Radio on Tuesday, Gideon Tadmor, the chairman of Delek Drilling and the chief executive of Avner Oil, said that those deals were in Israel’s interest.
“We are in advanced negotiations for signing agreements for export of gas to Jordan, and customers in Egypt, and possible partnership with Cyprus and possible export to Turkey,” Mr. Tadmor said. “It’s a geopolitical change” for Israel, he added.“We are in advanced negotiations for signing agreements for export of gas to Jordan, and customers in Egypt, and possible partnership with Cyprus and possible export to Turkey,” Mr. Tadmor said. “It’s a geopolitical change” for Israel, he added.
Shares of Delek Drilling and Avner Oil both fell more than 10 percent in trading in Tel Aviv on Tuesday. Shares in Delek Group, which controls the two companies, were down about 16.5 percent. All three companies are controlled by the Israeli businessman Yitzhak Tshuva. Shares of Delek Drilling and Avner Oil both fell more than 10 percent in trading in Tel Aviv on Tuesday. Shares in the Delek Group, which controls the two companies, were down about 16.5 percent. All three companies are controlled by the Israeli businessman Yitzhak Tshuva.
Noble Energy’s stock was down about 4.4 percent in New York.Noble Energy’s stock was down about 4.4 percent in New York.
Mr. Tshuva and Mr. Tadmor teamed up with Noble Energy to begin developing Israel’s gas reserves at the end of the 1990s. The partners have made a series of discoveries including Leviathan, which is one of the largest fields to have been found in recent years. The companies have also discovered gas off Cyprus.Mr. Tshuva and Mr. Tadmor teamed up with Noble Energy to begin developing Israel’s gas reserves at the end of the 1990s. The partners have made a series of discoveries including Leviathan, which is one of the largest fields to have been found in recent years. The companies have also discovered gas off Cyprus.
Noble owns about 40 percent of Leviathan, and the Delek companies hold about 45 percent. Ratio Oil Exploration owns the remaining portion.Noble owns about 40 percent of Leviathan, and the Delek companies hold about 45 percent. Ratio Oil Exploration owns the remaining portion.
The companies already had an agreement with Israel’s antitrust regulator to sell two smaller fields, called Tanin and Karish, to address monopoly concerns. Mr. Gilo of the antitrust commission said he was reconsidering this decision because it “did not create a real competitive solution to solve the problem of a monopoly in the market.”The companies already had an agreement with Israel’s antitrust regulator to sell two smaller fields, called Tanin and Karish, to address monopoly concerns. Mr. Gilo of the antitrust commission said he was reconsidering this decision because it “did not create a real competitive solution to solve the problem of a monopoly in the market.”
Noble expressed disappointment with the developments on Tuesday. A decision to reconsider the earlier settlement would “cast a shadow over the future of the oil and gas industry in Israel and will impact Noble Energy’s continued investment there,” Binyamin Zomer, the company’s country manager, said in a statement.Noble expressed disappointment with the developments on Tuesday. A decision to reconsider the earlier settlement would “cast a shadow over the future of the oil and gas industry in Israel and will impact Noble Energy’s continued investment there,” Binyamin Zomer, the company’s country manager, said in a statement.