01/06/2011 23:30

Houston-based firm has 6 offshore exploration licenses in Israeli territorial waters.

Pelagic Exploration Company, a Houston-based energy firm, has high expectations for the development of its six gas exploration licenses located in Israeli waters, despite the likelihood of having to pay higher royalties to the government.

“Change is inevitable,” Pelagic controlling shareholder Prentis Tomlinson told The Jerusalem Post in an interview in Tel Aviv this week. “At this point, we take no particular position on the final recommendations of the Sheshinski Committee. Although one can reasonably say that the fiscal tax regime governing the energy sector was lower than it should have been. But now that Israel is going through a typical process of a country that is discovering natural resources, it has gone too far. But I believe that it will swing back to a reasonable level.”

The Sheshinski Committee this week published its final recommendations on how Israeli resources should be taxed, presenting a partial easing of the tax burden proposed in its interim report in November. The change followed intensive pressure and threats from oil and gas exploration companies, including Noble Energy and Ratio Oil Exploration, which have recently found gas reserves potentially worth hundreds of billions of dollars in Israeli waters.

The recommendations suggest that the government’s take should be 52 percent to 62% of gas profits, compared with the current 30%. However, there is a lot of uncertainty over whether the recommendations will become legislation, in light of continued threats by gas exploration companies to stop projects.

“The recommendations would impede other companies coming to Israel and slow down investment,” Tomlinson said. “We are going to be subject to the same tax regime, but we are hopeful that necessary changes will be made. We are already investing $60 million in data acquisition and seismic surveys at our offshore gas exploration leases, so we are not going to turn back now.”

Last March, Pelagic acquired six exploration licenses – Yishai, Aditia, Lala, Yahav, Yoad and Ayala – covering an area of more than 2,000 square meters between the Ratio Yam cite, adjacent to the Leviathan field to the east, the Gal exploration permit area to the southwest and Block 12 in Cyprus waters to the west. At the end of December, Pelagic announced that it was advancing the second stage of a 3-D seismic survey of its offshore gas exploration leases.

“We hope that at the end of May we will have enough data and seismic mapping to decide where to drill the first exploratory wells starting in September,” Tomlinson said.

Last month, diamond mogul Benny Steinmetz acquired 50% of the rights in Pelagic’s six deepwater licenses for an undisclosed sum. The deal still awaits the approval of the National Infrastructures Ministry. In September, Israel Opportunity Oil & Gas Exploration Ltd. bought a 10% share for the rights in the same group of licenses for $2.5m.

Tomlinson, a second-generation oil and gas man, has more than 30 years of experience in the energy exploration industry in Texas, Iraq and West Africa. He has founded a number of companies in the energy sector, including exploration and production companies, a crude-oil trading company and an oil field service company.

“My initial interest in Israel started in mid-2009 following the Tamar discovery,” Tomlinson said.

“I like Israel. It has a good business climate, a rule of law and a young and developing oil and gas industry.”