Antitrust Authority eases restrictions on search for additional natural gas fields

The decision comes at a time when the natural gas sector’s fate in Israel still remains uncertain.

THE TAMAR gas field platform juts above the Mediterranean (photo credit: MARC ISRAEL SELLEM)
THE TAMAR gas field platform juts above the Mediterranean
(photo credit: MARC ISRAEL SELLEM)
In attempt to expedite the discovery of additional natural gas reservoirs in the Mediterranean, the Antitrust Authority on Sunday announced it would be providing some regulatory relief for certain partnerships performing new explorations.
“Cooperation on natural gas exploration among entities who do not have rights to the Leviathan and Tamar reservoirs should enjoy more lenient rules, which maximize the possibility of finding a gas reservoir that can compete with the existing monopoly,” acting Antitrust Authority commissioner Uri Schwartz wrote in his decision on the matter.
Sunday’s decision related specifically to collaborators exploring in the Oz and Palegic license zones and their request for an exemption from the Restrictive Trade Practices Law. Following consultation with the authority’s Committee for Exemptions and Mergers, Schwartz said he determined that these would neither be highly detrimental nor restrict competition in a large portion of gas market.
The decision comes at a time when the natural gas sector’s fate in Israel still remains uncertain, as political squabbles have prevented a deal between the government and the country’s dominant gas developers from moving forward.
Negotiations have gone on for nearly eight months since the December announcement by former Antitrust commissioner David Gilo (who stepped down on August 31) that he intended to review whether market dominance of the Delek Group and Noble constituted an illegal “restrictive agreement.”
Although the cabinet approved a compromise outline in mid-August, bureaucratic hurdles have held up final authorization. As a result, development has yet to begin at the large Leviathan and several smaller gas reservoirs.
As far as the Oz and Pelagic licenses are concerned, however, the exemption Schwartz granted on Sunday constitutes a change from previous policies, in which the Antitrust Authority imposed significant restrictions on these collaborations.
The authority had been previously requiring the companies to sell or reduce shares in one reservoir if gas would be found in multiple basins where they were active.
“As a rule, I do not see any reason to require them to sell gas reservoirs or reduce their involvement in gas reservoirs that they find, in whole or in part,” Schwartz said.
In the Pelagic and Oz license, the companies impacted by the exemption include Israel Opportunity, Nammax Oil & Gas Limited, Frendum Investments Limited, Daden Investment Limited, AGR Petroleum Services Holdings, Lapidoth- Heletz L.P., Coleridge Gas & Oil Exploration Israel L.P. and Caspian Drilling Company Ltd.
Israel Opportunity currently holds 10 percent of the Oz license, while Lapidoth has 41.5%, Frendum 21.5%, Placida Investment Ltd. 10%, Coleridge 12% and Capsian 5%. Following a disagreement among Israel Opportunity, Frendum and Placida, the latter two will now be transferring their shares to Israel Opportunity, increasing its shares to 41.5%, the Antitrust Authority said.
At Pelagic, Israel Opportunity holds 10%, Nammax 42.5%, Frendum 33.5%, Daden 9% and AGR 5%. There, Fredum will be transferring most of its shares to Nammax, bringing Nammax’s holdings up to 60%, and the rest of its shares to Israel Opportunity, bringing this firms holdings up to 16%, the authority explained.
After the transfer, Frendum will maintain 10% of the rights to Pelagic.
In October 2013, the Antitrust Authority decided to condition the transfer of 10% of the Oz rights to Israel Opportunity on the company’s commitment to reduce its influence should gas be found in its other holdings.
However, Sunday’s resolution enables Israel Opportunity to increase its shares without such limitations, the authority said.
While Sunday’s decision affects only the Oz and Pelagic license partners specifically, the Antitrust Authority said that in principle, the relaxed restrictions could be benefit players in other licenses.
The change in policy could even theoretically apply to the smaller players – those that are not the Delek Group subsidiaries or Noble Energy – in the Tamar and Leviathan reservoirs, the authority added.
“These cases will be examined on an individual basis, but with the overall ambition to facilitate as much as possible entry into the natural gas exploration sector, especially when dealing with parties who are not the dominant ones or connected to them,” a statement from the authority concluded.