Following six months of government-corporate disputes that have stymied Israel’s natural gas sector, the Security Cabinet unanimously voted to deem the resource’s development an issue of national security in an unprecedented move on Thursday.
Now that the matter has received Security Cabinet approval, a compromise outline among government officials and the natural gas companies will be conveyed to the full cabinet for final government approval. In order for the Security Cabinet decision to occur, Economy Minister Arye Deri activated for the first time in Israel’s history the Antitrust Law’s Article 52, in which an economy minister can exempt the antitrust commissioner from interfering in a “restrictive agreement” due to reasons of foreign policy or security.
“The Security Cabinet, today unanimously decided that, at this time, it is of decisive importance to move quickly to develop and expand the natural gas fields that have been discovered off Israel’s coasts, out of concern for state security and the foreign relations of the State of Israel,” a statement from the Prime Minister’s Office said, upon the conclusion of the cabinet meeting.
“The Security Cabinet also adopted Economy Minister Arye Deri’s proposal to transfer his authority under Article 52 of the 1988 Restrictive Trade Practices Law for Government approval,” the statement continued. “The outline will be published in the coming days and submitted for a public hearing.”
Israel’s natural gas sector – and particularly the development of the Leviathan reservoir – has faced a stalemate since December, after Antitrust Commissioner David Gilo said he would review whether the dominance of the Delek Group and Noble Energy constitutes an illegal “restrictive agreement.”
Although gas from the 282-billion cubic meter Tamar reservoir, located about 80 km. off the coast of Haifa, has been flowing into Israel since March 2013, work on the neighboring 621-b.cu.m. Leviathan basin has been unable to proceed as a result of the disagreements among government officials and the companies that followed.
Aiming to bring an end to the development freeze, an interministerial team – from the Finance Ministry, the National Economic Council and the National Infrastructure, Energy and Water Ministry – presented the Delek Group and Noble Energy with initial versions of a compromise outline on February 18 and then on May 6. While government officials said that companies responded favorably to the second outline, Gilo announced on May 25 his forthcoming August resignation due to his divergence with the other officials on the outline’s terms.
The final version of the outline, which has been under constant negotiations in the days leading up to the security meeting, remains largely similar to the previous version but with some key additions.
If passed by the government, the outline would require that the Delek Group’s subsidiaries Delek Drilling and Avner Oil Exploration exit the Tamar reservoir entirely, selling their assets there within six years. Houston-based Noble Energy would only need to dilute its assets from its 36-percent share today to 25%, and could remain the basin’s operator.
Both companies would be required to sell their holdings in two much smaller offshore reservoirs, Karish and Tanin. These sales must now occur within 18 months, according to Israeli media reports.
In the Leviathan reservoir, the newest outline would allow for joint sales of gas to Israeli consumers for the first 10 years of operation, potentially introducing a competitive, separate marketing scheme after the conclusion of that period, the reports said.