Avi Bar-Eli Oct 19, 2016 12:27 AM
Delek Group and Noble Energy – the two biggest players in Israel’s gas industry – will be barred from bidding in the government tender for new exploration sites scheduled for next month, Energy Ministry officials have decided.
The decision means that the two companies, which are the biggest partners in the Tamar and Leviathan gas fields, will not be able to compete for licenses for 24 blocs due to be auctioned by the government in a process that gets underway November 15.
The tender marks the first time in four-and-a-half years that Israel is opening up new licenses for exploration, with hopes of boosting output in the coming years and turning the country into a major energy exporter. Israel has about 900 billion cubic meters of gas reserves, a number that Energy Minister Yuval Steinitz says could grow to 2,200 BCM, enabling Israel to export to markets such as Turkey and Europe.
After a bruising battle over the gas framework agreement and competition issues, the government is now determined to inject more competition into the industry.
The tender for the offshore blocs, each of them 400 square kilometers, will be barred to companies that hold 25% or more of “rights to oil in production.” That means Delek, the Israeli holding company controlled by Yitzhak Tshuva, and Noble Energy, a Texas-based company led by David Stover, will be out of contention. Delek controls 31% of Tamar and Noble controls 33%.
A third company, Isramco, which is controlled by Kobi Maimon, with a 29% stake in Tamar, will also be barred under the rules. However, Alon Gas, with its 4% holding, will be free to participate.
The formula, however, raises at least two issues. The first is that Noble is supposed to reduce its share in Tamar to under 25% under the terms of the gas framework agreement reached between the government and the gas cartel earlier this year.
The second is that the “rights to oil in production” requirement means that Ratio, which holds 15% of the Leviathan field, which is not slated to begin pumping until 2019 at the earliest, can participate in the tender.
Israel is determined to lure new players into the industry, with Steinitz leading road shows to London, Singapore and Houston to market Israeli energy opportunities and officials trying to ensure as many domestic groups enter the bidding as well. However, low world energy prices, concerns about the Arab boycott, a history of turbulent regulatory changes and the absence of any firm export contracts for Leviathan have made it a hard sell.
The tender’s terms will give extra points to new players in the industry, which is defined as any group with no more than a 5% share in an existing field. Operating partners with the experience to drill and produce energy will be exempt from the ceiling and get extra points, which is expected to help Greece’s Energean Oil & Gas, which has bought the rights to the tiny Tanin and Karish fields.
Meanwhile, the Energy Ministry has sought – and will apparently get – a waiver from the government business concentration committee that will allow cartels from other sectors in the economy to participate in the bidding.
Ministry officials reason that domestically only the biggest Israeli companies have the financial resources to develop the fields.
“The ministry approached the committee last January about an exemption,” said one official. “It was told shortly afterwards that any decision was premature but hinted that it would [back the] agreement, because of the importance of bringing in new groups and the heavy investment required by the sector.”
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