Two Israeli energy firms intent upon exploring new underwater natural gas prospects west of Hadera signed a joint operating agreement with an Italian partner on Thursday – signifying the official entrance of a second major international gas developer into Israel’s Mediterranean waters.

The main stakeholder in the two fields, called Neta and Royee, is Israel’s Ratio Oil Exploration, which owns a 70-percent share of the project.

Israel Opportunity Energy Resources holds a 10% share, while 20% will be in the hands of Edison International Spa, a Milan-based subsidiary of the Electricite de France (EDF) Group. Neta and Royee are located within the Gal gas reservoir block, about 150 kilometers west of Hadera, and southwest of the Tamar and Leviathan cluster.

“We are very proud that such an internationally reputable company with knowhow and experience came to work with us and to be the operator,” Ratio CEO Yigal Landau told The Jerusalem Post on Sunday.

As the official “operator” of the exploration process, Edison will thereby be able to determine the number of employees as well as their work hours and compensation, according to an announcement about the agreement released to the Tel Aviv Stock Exchange (TASE) on Sunday.

As per the provisions of the agreement, the operator is not entitled to resign from its position during the first 12 months following the agreement signing date. Afterward, the operator can resign at any time, after providing six months of advanced notice, the TASE release said.

The Petroleum Commission of the Energy and Water Ministry granted the cohort exploration licenses for exploring the Neta and Royee fields on April 15.

The large Italian energy firm holds 58 concessions and permits in Italy and 37 licenses abroad.

Aside from a short list of small international developers, the only major global gas explorer to enter Israel thus far has been Houston-based Noble Energy, which holds 36% of the already flowing Tamar reservoir and has 39.66% of the Leviathan field, which is double the size of Tamar. Ratio possesses 15% of Leviathan. Although Australian giant Woodside Petroleum has signed a conditional agreement to take on a 30% chunk of the Leviathan field, the deal has yet to be finalized, due to the government’s failure to formulate an official export policy.

While many seismic reports have been conducted on the Neta and Royee fields, strict security measures prohibit Ratio and its partners from revealing estimations as to how much gas the reservoirs might contain, Landau explained.

Regarding the entrance of the Italian firm, however, he stressed, “They believe what they saw.”

Miki Korner, the founder and CEO of the M. Korner oil and energy consultancy group, told the Post that he sees the Edison entrance into the Israeli gas market as “very, very good.”

“It’s the second important company that is drilling,” said Korner, who was the chief economist and engineer at Israel’s Natural Gas Authority and advised the Zemach Committee on its export policy recommendations.

Although Edison International Spa may be the second major international company to explore Israel’s gas potential, a few small firms are active in the region. The partnership drilling for gas in the Sara and Myra reservoirs – which were later deemed to be dry – included Canadian operator GeoGlobal Resources. Meanwhile, the cohort exploring Yam-3 has a small Azerbaijani operator called Caspian Drilling. In a string of reservoirs just west of Leviathan, a small Norwegian firm called AGR is acting as the operator for the exploration team.

These “small” and “nameless” companies pale in comparison to Noble Energy, “which is more or less everything,” according to Korner.

“And Edison is in the same league,” he said. “It’s very, very good for the market. I think it’s very, very good that Noble will not be the only one.”

Regarding Neta and Royee, while companies involved cannot legally provide estimates as to how much gas might be buried there, Korner also stressed that there is still no way to really know how much is present anyway.

For example, he explained, the first declaration of a gas estimate for the Tamar reservoir was only 88 billion cubic meters, while today the finds have been confirmed to stand at 282 billion cubic meters.

“A large professional has come and said that we think there’s gas.

There can be an incident that there’s no or little gas there, but I believe there’s a lot of gas there,” Korner said, noting that to him, “a lot” means between around 85 and 115 billion cubic meters.

“But this is a belief, not a professional estimation,” he stressed.

It is indicative, however, that the “very respectable and serious company” Edison International Spa has elected to explore in Israel, according to Korner.

“They think the potential for gas in a substantial amount is there and therefore they invested money to come to Israel,” he said.

Nevertheless, Korner said that he does not think that Edison’s decision will necessarily prompt other sizable international hydrocarbon firms to enter the market, as representatives from several companies have told him that they do not see the Israeli government as a partner.

In addition to lacking a stable export policy, the government poses problems with regard to allowing ship docking on shore, approving foreign professionals to work in the country, establishing facilities and getting past many other regulations, Korner explained.

Although no first-tier energy companies would come to Israel at all due to their involvement in the Arab world, there are at least 20 second- and third-tier companies, such as Noble Energy, that could be potential partners for Israel, if not for the bureaucratic obstacles, he added.

That being said, Korner still said he had hopes as Edison entered the sector.

“Let’s hope they will find something so they will need to stay, and we will have at least two serious companies,” he said.

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