ISRAEL
82
Legal Business
April 2015
Ever since the sizeable Tamar and Leviathan
natural gas fields were discovered in 2009 and
2010, Israel has been coming to terms with its
energy wealth. Israeli energy company Delek
and US-based Noble Energy have become the
most powerful players in the industry.
Many would have expected Israel to still be
celebrating its good fortune, but its antitrust
authority has had persistent concerns about
Delek and Noble’s perceived dominance.
Tamar, which is understood to hold 10.8
trillion cubic feet of natural gas, started
flowing in 2013. Leviathan holds 22 trillion
cubic feet and is not yet in production.
‘Noble and Delek have been brave enough
to spend considerable amounts of money on
exploration and they have hit the jackpot,’
comments Simon Jaffa of Barnea & Co.
As the big players in the market, the
antitrust commissioner has concerns that they
hold a de facto monopoly to supply natural gas
to the Israeli market. A previous attempt to
reach a satisfactory arrangement with Delek
and Noble was cancelled at the end of 2014, with
the antitrust authority director general David
Gilo stating that the natural gas monopoly of
Delek and Noble should be broken up.
How this is to be achieved is still unclear.
Noble and Delek own 85% of the Leviathan
field and control the Tamar site as well. There
had been proposals that the gas from Tamar
reserved for Israeli consumers, as well as the
smaller Tanin and Karish gas fields, be sold
to a third party. Yet with Leviathan being the
most significant of the various fields, there
were remaining concerns that these measures
would still not defeat the alleged monopoly.
With all this regulatory uncertainty,
efforts to promote foreign investment
into Israel’s natural gas industry are now
uncertain. In May 2014, Australia’s Woodside
Petroleum withdrew its $2.7bn bid to buy a
25% stake in Leviathan. ‘All this uncertainty
puts off foreign companies coming into Israel
and investing,’ Jaffa comments.
He has concerns about how fast the gas
industry is moving in Israel and that the longer
it takes to get Leviathan into production the
more it will depreciate the field’s long-term
value. He believes that neighbouring states
that commercialise their gas reserves first will
have a natural advantage on the regional and
international stage.
‘Until the matter has been finally settled,
investment and projects in the upstream oil
and gas sector are in limbo,’ says Renelle
Joffe, the head of the energy group at
Meitar Liquornik Geva Leshem Tal. As such,
she is downbeat about the short-term
outlook for the energy practice: ‘Following
the recent antitrust decision, the practice
has been focused more on regulatory issues
and less on projects, which in my opinion is
a great pity.’
However, Dan Hacohen, head of the
energy practice at Agmon & Co Rosenberg
Hacohen & Co, who has worked on all the
major gas discoveries in Israel, is more
upbeat: ‘Proceedings will probably bring
about divestitures and assets will change
hands bringing in international investment.’
MONOPOLY PLAY: ANTITRUST CONCERNS LEAVE NATURAL GAS SECTOR IN LIMBO
Tamar gas field
© Albatross/Israel Sun/Rex
