Israel Security Cabinet deems gas issue of ‘national security,’ allowing deal to advance

Following six months of government-corporate disputes that have stymied the natural-gas sector, the security cabinet voted unanimously on Thursday to deem development of the resource an issue of national security.This means that a compromise outline among government officials and the natural gas companies will be conveyed to the full cabinet for final government approval.For the security cabinet decision to act, the government invoked for the first time in the state’s history the Antitrust Law’s Article 52, under which the antitrust commissioner can be prevented from interfering in a “restrictive agreement” due to reasons of foreign policy or state security.“The security cabinet, today unanimously decided that, at this time, it is of decisive importance to move quickly to develop and expand the natural-gas fields that have been discovered off Israel’s coasts, out of concern for state security and the foreign relations of the State of Israel,” a statement from the Prime Minister’s Office said.“The security cabinet also adopted Economy Minister Arye Deri’s proposal to waive his authority under Article 52 of the 1988 Restrictive Trade Practices Law in favor of cabinet approval,” the statement continued.The outline proposal will be published in the coming days and submitted for a public hearing, according to the statement.Israel’s natural-gas sector – and particularly development of the Leviathan reservoir, 130 km.west of Haifa – has been in limbo since December, when Antitrust Commissioner David Gilo said he would review whether the market dominance of Delek Group and Noble Energy constitutes an illegal “restrictive agreement.”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, work on the neighboring 621 b.cu.m. Leviathan basin has been unable to proceed as a result of the disagreements between government officials and the companies.Aiming to bring an end to the development freeze, an interministerial team – from the Finance Ministry, the National Economic Council and the National Infrastructure, Energy and Water Ministry – presented Delek Group and Noble Energy with versions of a compromise outline on February 18 and again on May 6.While government officials said the companies responded favorably to the second outline, Gilo announced on May 25 that he would resign effective in August because of his differences with other officials on the outline’s terms.The current draft of the outline, which has been under constant negotiation in the days leading up to Thursday’s security cabinet meeting, remains largely similar to the previous version but with key additions.If the government approves it, Delek Group’s subsidiaries Delek Drilling and Avner Oil Exploration will be forced to exit the Tamar reservoir, selling their assets there within six years. Houston-based Noble Energy could remain the basin’s operator, needing to dilute its ownership from the current 36 percent share to 25 percent.The Delek Group subsidiaries and Noble Energy would be required to sell their holdings in two much smaller offshore reservoirs, Karish and Tanin.Those sales must take place within 14 months, with the possibility of operating them for a further four months under the supervision of a trustee.In the Leviathan reservoir, the current outline would allow the companies to conduct joint sales of gas to Israeli consumers for the first 10 years of operation, potentially introducing a competitive, separate marketing structure thereafter.