Lior Gutman
Published: 02.19.15

Noble Energy announced on Thursday it would not further invest in its offshore natural gas operations in Israel until Jerusalem settles a regulatory dispute regarding the Leviathan and Tamar fields in the eastern Mediterranean.

During its quarterly earnings call, Noble said “Further investments in the expansion of Tamar, as well as the initial development of Leviathan, have been suspended until regulatory issues are resolved.” However, the firm’s representative said that firm was still intent on completing an onshore compression project in Ashdod in the first half of 2015.

Noble officials also stressed that they were committed to finding a solution that would be agreeable to all parties to allow for the development of Israeli natural gas reserves.

Monopoly regulation
Earlier in the day, Israel decided to restructure the private ownership of Tamar and Leviathan, its two biggest natural gas fields, a move which will see new regulations put in place to break what Israel’s anti-trust authority deemed a monopoly.

An inter-ministerial committee with representatives from the Israel Antitrust Authority, Finance Ministry, head of the National Council for Economics, Economics (Infrastructure) Ministry, Energy and Water Ministry and the Attorney General’s office published an outline for the restructuring which it presented to Yitzhak Tshuva’s Delek and Noble Energy Thursday.

Noble and Delek are the largest stakeholders in Israel’s two main gas fields – Tamar, which began production in 2013, and Leviathan, the world’s largest offshore gas discovery of the past decade, which they hoped to bring online in 2018.

According to the outline, the State will regulate prices on natural gas sales until the ownership restructuring is complete, followed by a cap on sales prices for the next five years.

The government is working to create an ownership structure in which the remaining gas in the Tamar field will be opened up to a new company and the two’s additional partner – Isramco.

Thus, the state hopes to create competition between the two large fields, by preventing those running the fields to influence the sales and practices of the other fields, de facto decentralizing the new and lucrative market.

Avital Lahav contributed to this report.,7340,L-4628805,00.html
Gov’t seeks exit of both Delek, Noble from Tamar reservoir – JERUSALEM POST

By SHARON UDASIN 02/18/2015

Outline presented to gas companies calls for separate marketing of Leviathan basin gas.
Map of Leviathan gas field

Map of Leviathan gas field. (photo credit:REUTERS)

Aiming to resolve a stalemate that has all but frozen the country’s natural gas development, government officials are demanding that the Delek Group and Noble Energy exit the offshore Tamar reservoir and market their shares in the neighboring Leviathan basin separately.

The officials presented an outline to the companies on Wednesday, aimed at putting an end to a nearly two-month-long situation in which the reservoir partners and the Israel Antitrust Authority have been butting heads. They unveiled portions of their plan to journalists on a conference call involving representatives from the Finance Ministry, the Antitrust Authority, the National Economic Council in the Prime Minister’s Office, and the National Infrastructure, Energy and Water Ministry.

“We understand today that the quick connection and the continued development of the gas market has very important consequences for the economy and for the state and for the public interest,” the officials said.

The fate of the Leviathan gas field, 130 km. west of Haifa, first came into question on December 23, when Israel Antitrust Commissioner David Gilo announced that a proposed consent decree regarding the entry of the Delek Group and Noble Energy into the reservoir would not receive approval as had previously been agreed upon. In addition to nixing his support for the decree – which would have allowed the companies to sell two smaller reservoirs, Karish and Tanin, in order to remain in Leviathan – Gilo said he would consider whether their stake in Leviathan constituted an illegal “restraint of trade,” similar to a cartel.

Houston-based Noble Energy owns a 39.66-percent stake in the 621-billion-cubic-meter Leviathan reservoir. Delek Group subsidiaries Delek Drilling and Avner Oil Exploration each hold 22.67%, while Ratio Oil Exploration has a 15% share.
Noble Energy also holds 36% of the Tamar gas reservoir (located 80 km. west of Haifa), which began flowing to the domestic market in March 2013. Delek Drilling and Avner Oil Exploration each own 15.625%, Isramco controls 28.75% and Dor Gas has 4%.

At Karish and Tanin, which collectively hold about 70 of gas, Noble Energy is a 47% shareholder, and each of the Delek Group subsidiaries has 26.5%.

Development of the Leviathan basin has been stunted due to the disagreement between the companies and the Antitrust Authority. Karish and Tanin also have yet to be developed.

According to the outline that the government officials presented to the Delek Group and Noble Energy on Wednesday, still in draft form, the government is demanding that Delek exit the Tamar reservoir entirely. Noble Energy, meanwhile, would need to sell a portion of its holdings in Tamar, but the officials would not specify exactly how much the Houston-based company would need to forgo. In this case, Isramco would likely remain the main shareholder in the Tamar basin.

“We are talking about the exit of the Delek and Noble partners from Tamar in a way that they will not be players anymore regarding everything that is related to consumers who want to sell gas in the local market,” the officials said. “They will not be the owners of the local gas that is relevant to local competition.”

Continuing to speak only vaguely about Noble Energy’s future presence in the Tamar reservoir, the government officials did emphasize that “there is a difference between an operator who supplies and transports the gas, and a player who is not an operator.”

Regarding Karish and Tanin, the outline stipulates that Delek and Noble would sell these reservoirs to an outside party.
In Leviathan, each of the shareholders – Delek, Noble and Ratio Oil Exploration – would be required to market its portion of the gas separately. Acknowledging that this was not a simple plan, the government officials said they felt they were offering “a fitting balance.”

During the conference call regarding the outline, the government officials stressed the importance of legislating ceilings for gas prices as a further mechanism for ensuring the resource’s affordability.

Noble Energy representatives from Houston are supposed to arrive in Israel next week, and the government officials said they expected to hear the representatives’ response then. Both Noble and Delek declined to comment at this point regarding the outline’s contents.

By implementing the arrangements in the outline, the government officials said they intend to provide an environment of certainty for all players involved and “ensure that the market is competitive enough.”

Referring to recent memoranda of understanding signed among the Tamar and Leviathan partners and neighboring states, such as Jordan and Egypt, the officials stressed the urgency of developing the basins.

“There is a geopolitical opportunity that we cannot pass up,” they said.

If these memoranda of understanding – which “have value beyond typical contracts” – are not transformed into full-fledged agreements soon, they may no longer be on the table for Israel, the officials warned.