Israel approves the natural gas framework
This week’s major development in the Eastern Mediterranean is Prime Minister Netanyahu’s signing of the natural gas framework deal that will allow the partners in Israel’s Leviathan to move ahead with the development of the giant field and reach export stage. Netanyahu’s approval of the plan to develop Israel’s offshore natural gas field via the application of clause 52 of the Antitrust Law strips the country’s Antitrust Authority from its overseeing power over the industry to avoid any hindrance to the effective development of the fields. The Prime Minister's application of clause 52 of the Antitrust Law, granting the economy minister the exclusive power to override decisions by the Antitrust Authority chief on issues with sensitive strategic or diplomatic implications, was considered artificial by the chairman of the Knesset Economics Committee and motivated by economic reasons rather than national interest.
The Knesset Economics Committee voted against the framework
The Committee’s non binding recommendation issued on Wednesday after 11 sessions was against Netanyahu’s plan (7 votes against 6), that it considered the plan to be motivated by economic reasons, rather than diplomatic, as advanced by the Prime Minister. The committee announced it was “not convinced at this time, as well as in the foreseeable future, [that] there are reasons of foreign policy and security that justify such an extreme measure as an administrative exemption from the law’s commands in the hands of the economy minister, while the supervision of monopolies and restrictive trade practices should be carefully controlled, in the manner determined by the Antitrust Law."
Noble Energy applauded Netanyahu's decision
Noble’s Senior Vice President, Keith Elliott, welcomed the news expressing his satisfaction, stressing the importance of the development of the fields to the security and economic prosperity of Israel and confirming that the approval of the framework enables Noble to move ahead with the development of Israel’s offshore fields.
Appeal against the decision before the High Court of Justice to be expected
Netanyahu’s decision to override the committee’s recommendation by the signing of the deal at a ceremony on Thursday held at the Neot Hovav Industrial Park in the Negev, is not considered final as it may be appealed against by the opposition party the Zionist Union before the High Court of Justice. Former Antitrust Commissioner David Gilo resigned in August to express his opposition to the deal, as he was concerned that price would be distorted in Israel’s natural gas market as a result of permitting Noble and the Delek Group to hold on to their shares in Israel’s largest offshore fields.
Israel's ambition to export to Egypt still at risk
Israel’s delays in the development of its offshore fields have been caused by a dispute between the partners in the Leviathan and Tamar fields and the country’s competition regulator accusing the owners of the fields of constituting a cartel that would distort competition in the domestic natural gas market. Approving the natural gas framework would enable Israel to export gas to regional markets, namely Egypt. The two countries have been engaged in talks over the possibility of exporting gas from Israel’s Tamar and Leviathan to Egypt’s domestic market.
Despite its previous appetite to import gas from its neighbour, Egypt has ordered the immediate halting of the gas negotiations after a ruling by international arbitrators earlier this month ordering Egypt to compensate Israel with $1.76 billion to repair the damage caused by the disruptions in the flow of natural gas in the aftermath of the Arab Spring in 2011. At the time, Egypt was supplying Israel with Egyptian gas, but attacks to the pipeline caused major disruptions following the toppling of President Husni Mubarak.
Cyprus still eyeing the Egyptian market
Israel’s struggles to approve the natural gas framework are not the only hurdles it will face before it can export gas to Egypt and the region, and potentially use Egypt’s underused export terminals to reach distant lucrative markets. Its newly strained relationship with Egypt will also have to be restored by diplomatic means. Despite the discovery by ENI of a huge field, Zohr, in Egyptian waters, Egypt was still looking to import gas from Israel in the short term to solve its energy crisis. Egypt’s refusal to compensate Israel as ruled by the arbitrators of the International Chamber of Commerce, and its discovery of the Zohr field estimated at up to 30 trillion cubic feet make a gas deal with Israel fragile.
Egypt maintains a good relationship with Cyprus and has announced it is still interested in importing gas from Cyprus’ Aphrodite field. Cyprus has been involved in a series of meetings with its neighbours Egypt, Israel and Greece to discuss ways of optimising the natural gas finds in its waters. Cyprus has also discussed the possibility of joint export infrastructures with Israel. Exporting gas to Egypt via a common undersea pipeline between Israel and Cyprus will now depend on the future of the Israeli-Egyptian relationship.
Lebanon said to be closer to opening its first licensing round
Also in the Eastern Mediterranean, Lebanon is now closer to opening its first licensing round. The country’s first offshore bidding round has been repeatedly postponed despite substantial interest expressed from international oil and gas majors in the country’s pre-qualification round.
Lebanon’s political vacuum, the country operating without a President since May last year, and the spillover of Syria’s civil unrest next door have prevented the Government from issuing two pieces of legislations that are essential to launching explorations offshore. The two missing decrees will delineate offshore blocks and lay out a model production-sharing agreement. Lebanon’s Minister of Energy announced this week that the different political parties are closer to reaching an agreement regarding the country’s energy industry. The fear remains whether international oil and gas companies would still be interested in tapping Lebanon’s waters after losing confidence in the country’s ability to stick to deadlines and lead the process to fruition.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Karen is also a co-founder of the Lebanese Oil and Gas Initiative (LOGI). She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat
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