Tamar gas field.
(photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
National Infrastructure, Energy and Water Minister Yuval Steinitz said on Tuesday he believes recent turmoil in the country’s natural gas sector will be resolved within a couple of months, before too much damage is done.
The High Court this week barred the government from giving a 10-year guarantee to energy companies interested in developing the Leviathan offshore gas field.
The move could delay the country’s emergence as a regional natural gas exporter.
“I was surprised. I thought that even the Supreme Court could not neglect, could not ignore the situation and the potential economic damage to Israel,” Steinitz said. “Many similar gas operations in deep water already have been canceled worldwide and we are trying to save our own.”
Energy analysts have warned of a long process to find an alternative arrangement, but Steinitz was more optimistic: “I think it will take a few weeks or maximum a couple of months,” he said.
Steinitz met with CEO of Delek Drilling Yossi Abu and Bini Zomer, Noble Energy’s Israel country manager, to discuss possible ways to satisfy the High Court’s demands.
Among the possibilities discussed, according to the minister’s office spokeswoman, would be to provide security guarantees either to the gas companies themselves or to the banks financing Leviathan’s development. Another option would be to create stability legislation. A third option would be to provide a mechanism for monetary compensation if there were to be any further regulation changes.
“We keep the right to make changes, but if this government or the next government will make significant changes, then [the companies] will be able to ask for compensation,” Steinitz said.
Both of the executives, according to the statement, expressed hope that a solution would be forthcoming and that development delays would not be incurred.
Houston-based Noble Energy owns a 39.66 percent stake of the 621-billion-cubic-meter Leviathan reservoir, while Delek Group subsidiaries Delek Drilling and Avner Oil Exploration – each holding 22.67%, and Ratio Oil Exploration holding a 15% share.
The High Court has given the parties involved until March 2017 to find a viable solution.
The consortium has set 2019 as the year for which it hopes natural gas will begin flowing to consumers.
However, according to earlier estimations by Zomer, a deal would have to be approved by the end of this year for this to happen.
A report from the ministry released earlier this month said that between 2014 and 2015, the demand for natural gas in the country increased by 11%, from 7.57 BCM to 8.41 BCM. Some 98% of this gas comes from Israel’s only developed natural gas reservoir, Tamar, of which Noble Energy owns 36% and Delek Group subsidiaries – Delek Drilling and Avner Oil Exploration – each own 15.625%.
Delek Drilling and Avner Oil Exploration each posted profit increases in 2015, according to their annual report, released Monday.
In 2015, Delek Drilling made $111.5 million in profits, a 58% increase from the year before, when it made $70.5m. Meanwhile, Avner Oil and Gas posted profits of $106.9m. last year, a 62% increase from the $65.9m. it made in 2014.
A statement from Delek reported that the increase in profits reflected both an increase in natural gas being extracted from Tamar, combined with “a significant reduction in the production costs and financing expenses.” The company said that between 2014 and 2015, expenses went down 36%, from $58.7m. to $37m.