Netanyahu, Steinitz: Israeli gas market must remain attractive to investors

Steinitz: "We have a window of time and if we do not live up to it, we will face a hopeless situation,"

By
June 17, 2015 19:41
3 minute read.
Israel's natural gas

Israel's natural gas. (photo credit: MINISTRY OF NATIONAL INFRASTRUCTURES)

 
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As industry stakeholders await the final terms of a deal aimed at reviving a faltering natural gas sector, both Prime Minister Benjamin Netanyahu and National Infrastructure, Energy and Water Minister Yuval Steinitz stressed on Wednesday the need to keep Israel’s hydrocarbons attractive to investors.

“We must be very cautious. We are not living in a bubble,” Netanyahu said at the Knesset in the afternoon. “The investors can go to other places. For companies to come here, we need it to be worth their while. I am determined and committed to the gas [from off the coast] reaching the Israeli market.”

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Following a meeting with Delek Group chairman Yitzhak Tshuva on Tuesday night, Steinitz made similar comments on Wednesday morning in an interview with Army Radio. The energy minister met with Tshuva as part of a series of discussions and negotiations that have been taking place since December, when Antitrust Commissioner David Gilo said he would review whether the market dominance of the Delek Group and Noble Energy constitutes an illegal “restrictive agreement.”

“We have a window of time and if we do not live up to it, we will face a hopeless situation,” Steinitz said.

“If we are the only Western society that is supposed to discover more gas and not even one company is ready to explore, this means that we must ask ourselves if we are attractive enough,” he told Army Radio. “The only way to ensure that there will not be a monopoly here is to ensure that the gas sector will continue to be developed and that they will continue to search and find more gas fields in the Mediterranean Sea.”

Although gas from the 282-billion cubic meter Tamar reservoir, located about 80 km. off the coast of Haifa, has been flowing into Israel since March 2013, development of its neighboring 621-b.cu.m.

Leviathan basin has been unable to proceed as a result of disagreements among government officials and the companies.

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Aiming to bring an end to months of disputes and the development freeze, an interministerial team – from the Finance Ministry, the National Economic Council and the National Infrastructure, Energy and Water Ministry – presented the Delek Group and Noble Energy with an initial compromise outline on May 6. While government officials said that companies responded favorably at the time, Gilo announced on May 25 his resignation, effective in August, due to his disagreement with the other officials on the outline’s terms.

Ideally, the agreement will be finalized within the next two to three weeks, Steinitz said in the radio interview on Wednesday.

The most recent version of the proposed compromise outline would require that the Delek Group’s subsidiaries Delek Drilling and Avner Oil Exploration exit the Tamar reservoir, selling their assets there within six years. Houston- based Noble Energy would only need to dilute its assets from its 36-percent share today to 25 percent, and could remain the basin’s operator.

Both companies would be required to sell their holdings in two much smaller offshore reservoirs, Karish and Tanin.

Unlike the previous draft of the compromise outline, which Gilo had supported, this version would revoke a mandate that all of Leviathan shareholders market their gas to the Israeli market separately, and would impose weaker restrictions on Noble in Tamar.

Steinitz’s meeting with Tshvua on Tuesday night lasted nearly five hours, and included representatives from other relevant ministries as well as other representatives from Delek and Noble Energy, a spokeswoman for the minister said. While participants in the meeting spoke about their major disputes, no final decision was made, other than to continue discussions, the spokeswoman said.

The prime minister, meanwhile, addressed the gas issue in the Knesset on Wednesday as part of a response to opposition complaints that he had “abandoned the periphery.”

“We determined that the state will receive a high rate of tax, we decided that most of the gas will serve the Israeli market, and we are acting to ensure that gas prices will be competitive,” Netanyahu explained.

Opposition lawmakers have been vocal against the latest version of the compromise outline, arguing it would not enable sufficient competition in the gas market.

Netanyahu told opposition MKs that if he would listen to them, the gas would still be underground a year from now and they would complain that he was a failure and call for a commission of inquiry.

“Israel needs non-stop investments. That creates jobs and guarantees our continued prosperity,” he said.

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