RCEM: Views on Energy News

The five year stalemate around the giant gas field named Leviathan, located offshore Israel, might be finally resolved after a chain of events alarmed politicians and energy strategists in the only patch of land with not a drop of oil. Personally Israeli Prime Minister Benjamin Netanyahu stepped into the ring, displaying readiness to take the full responsibility for precipitating the stalled project against all odds, which are many. But first came the lightening news of the Italian energy major Eni discovering the Zohr gas deposit offshore Egypt with an estimated resource bas of some 850 bcm (the largest find since 1967). It turned into a game changer, diminishing the prospects of Israel to reach out to potential customers in Egypt and, for fear of Zohr’s export potential, to other energy hungry clients in the vicinity.

The gas bonanza, which befell Egypt, led to a close shave vote in the Knesset that approved a controversial framework deal on the Leviathan field development by a consortium of Houston-based oil company Noble Energy and Israeli company Delek Group.

The ‘go-ahead’ for the project was endorsed by 59 parliamentarians with 51 remaining in firm opposition to the endeavour due to a strong suspicion, not unfounded, that the mighty duo assuming too much economic power, incompatible with the national anti-trust legislation.

At the end of the day it boiled down to a “do ut des” compromise: in return for a free hand in untapping the Leviathan riches Noble Energy would have to reduce it share in the already functioning Tamar field to a modest 25% within the next six years and agree to a price cap when charging domestic consumers for gas supplies.

The Texas-based company must have considered all the pros and cons, primarily the rate of investment return, and consented to the diminishment of its footprint on Israel’s energy market. It was a turnaround since late last year Noble had frozen investment activity due to the ruling of Israel’s antitrust commissioner. Ever since, according to insiders’ sources contacted by local media, Noble lobbyists have been working closely with Knesset’s lawmakers, and it finally did pay off.

Remarkably, it was no one else by PM Netanyahu who became the last straw to break the camel’s back. After the resignation of Economy Minister Aryeh Deri, a staunch opponent of waiving antitrust laws in the case of Noble-Delek imperial overstretch, the head of the cabinet claimed he would step into the shoes of the gone saboteur.

Immediately, Netanyahu’s enemies appealed for a ruling of the High Court of Justice, questioning the concentration of power in one hands. Actually, the economy portfolio would the fourth in possession of PM Netanyahu who is also supervising foreign policy, communications and regional cooperation. PM Netanyahu pledged that once the economy ministry comes under his control he would give the green light for works on Leviathan field. “I will authorize (agreement)”, he said.

Noble Energy strategic planners remain confident that they can make up for time lost. The regional markets are still there, and Egypt, in particular, despite the godsend hydrocarbon bonus, would still require a flow of imported natural gas to the tune of some 4 to 5 billion cubic feet per day. Israel would be the best option as a supplier, given the proximity, and the still theoretical opportunity to use the existing infrastructure in the reverse mode.

Moreover, the potential of LNG production is not discounted, and Noble Energy has plainly stated that when the time is ripe it would be looking for customers in Europe as well. However, although Noble is gearing up for accelerated development of Leviathan field, it would take from three to four years to put it on stream. With headwinds blowing across the global energy markets, the persistent volatility does not provide for accurate forecasts of what is to become of either Zohr or Leviathan.

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