Antitrust Authority: Noble, Delek should sell smaller reservoirs, remain in Leviathan

Replacing energy giants with competitors in natural gas basin is physically impossible, says antitrust commissioner.

gas noble 370 (photo credit: Courtesy Noble Energy)
gas noble 370
(photo credit: Courtesy Noble Energy)
Although replacing Noble Energy and the Delek Group with competitors in the Leviathan natural gas basin might have been ideal, it is physically impossible for the Antitrust Authority to remove the partners from the reservoir, Commissioner David Gilo said on Thursday.
“I would also have preferred that Delek and Noble left Leviathan, and that there was competition between Leviathan and Tamar, but I do not have the authority to physically remove them from Leviathan,” Gilo said during a Knesset Economic Affairs Committee hearing on the subject. “All I can do to help is declare that there was a violation, and only the court could remove them physically from the basin, and this could take many years.”
Gilo has been exploring the issue of whether the majority presence of Houston- based Noble Energy and the Israeli firm the Delek Group in both the Tamar and Leviathan reservoirs constitute a cartel, and whether competition must be introduced into the latter of the two.
To the dismay of the politicians and NGOs advocating such a move, Gilo has determined that the companies can, in fact, remain in Leviathan, provided that they sell their smaller reservoirs Karish and Tanin.
“We initiated a process that was based on the fact that they did not seek approval from the Authority when they entered Leviathan,” Gilo said.
The 282 billion cu.m. of Tamar reservoir, which came online in March 2013, is owned 36 percent by Noble Energy, while Delek Drilling and Avner Oil Exploration – both subsidiaries of the Delek Group – each own 15.625%.
The firms Isramco Negev 2 and Dor Gas own 28.75% and 4%, respectively.
Tamar’s much larger, approximately, neighbor Leviathan is also by and large in the hand of Noble and Delek, with Noble owning 39.66% and Delek Drilling and Avner Oil Exploration each holding 22.67%. A third partner, Ratio Oil Exploration, holds 15%.
The smaller Karish and Tanin reservoirs – in each of which Noble Energy has a 47% hold and the two Delek Group subsidiaries own 26.5% respectively – contain a total of roughly of natural gas.
Gideon Tadmor, the CEO of Avner Oil Exploration and chairman of Delek Drilling, reminded those partaking in the committee session of the billions of dollars the partners have invested in developing the gas reservoirs.
“It is impossible to exaggerate the importance of developing Leviathan.
This is the peak of Israeli gas development,” Tadmor said. “I always said, ‘The more the merrier,’ but what can we do, no one else found the gas.”
While this approach may create shortterm competition and avoid prolonged litigation, committee chairman Avishay Braverman (Labor) said he is uncertain this compromise will benefit the consumers.
MK Shelly Yacimovich sharply criticized Gilo, telling him that his plans are “not a compromise but a letter of surrender to the dictates of [Yitzhak] Tshuva,” the majority shareholder of the Delek Group.
“There are very few people that history has placed at such a dramatic crossroads regarding the fate of Israel, and the expectations from you, David, are many, and as of now, unfortunately, you are not living up to any of them,” Yacimovich said. “You are highly responsive to the gas companies and to their many skilled speakers, but to the needs and the demands of the public.”
“All you have to do,” she continued, “is something simple – declare the business acquisition rights to the field as constituting a cartel.”
Amir Hayek, CEO of Manufacturers Association, sent a letter prior to the meeting with Braverman, saying that his organization sees great importance in ensuring reliability of gas supply as well conditions for competition. None of these goals, however, can be realized without allowing for Leviathan’s development, he said.
Similar to Hayek’s comments, MK Ariel Attias (Shas) said that while it would be ideal to operate in the most just manner possible, the issue remains – the country needs the gas sitting in Leviathan.
In response the criticism coming from Yacimovich and heads of NGOs throughout the meeting, Gilo said that this plan is not what the Delek Group suggested, but rather terms upon which the Antitrust Authority insisted.
“They had no choice but to accept what we demanded,” Gilo said, saying that he is only acting with the good of the public in mind. “If competition does not occur, we will insist upon price controls and will not hesitate.”