By Sara Toth Stub
JERUSALEM--Israel's cabinet Sunday approved a regulatory
framework that will allow the stalled development of its large
offshore natural gas fields to resume.
The plan requires the main stakeholders, U.S.-based Noble Energy
Inc. and Israel's Delek Group Ltd., to reduce their stakes in the
Tamar field, which contains an estimated 10 trillion cubic feet of
gas, in order to maintain their stakes in the larger Leviathan
field, which contains about 16 trillion cubic feet of gas.
The Tamar and Leviathan fields, discovered in 2009 and 2010,
respectively, are worth an estimated $25 billion, according to an
April report from Barclays.
The plan still needs approval from Israel's legislature, the
Knesset, where it will likely face opposition from some lawmakers
who say it doesn't do enough to ensure low gas prices and
competition.
Knesset opposition leader Isaac Herzog criticized the deal.
"A government headed by me would decide on a gas deal that's
fair and decent for Israeli citizens that includes price controls
and represents the real concerns for the future of the State of
Israel," Mr. Herzog, the co-head of the Zionist Union party, wrote
on his Facebook page.
Both companies reached an agreement with Prime Minister Benjamin
Netanyahu and other government officials on the framework on
Wednesday.
Israel's energy companies welcomed the news, with shares rising
about 1% across the sector on the Tel Aviv Stock Exchange on Sunday
afternoon.
"The market has been waiting for this news," said Steven Shein,
a trader at Psagot Investment House in Tel Aviv. But analysts said
uncertainty about tax and royalty regimes remain.
Development of the fields had been on hold, with companies
unable to finalize preliminary export and partnership deals, since
December, when Israel's antitrust regulator said Noble and Delek
constituted a monopoly. In a controversial move, the government
executed a legal clause that allows it to override the regulator,
saying it is to the benefit of Israel's economy to make sure the
gas flows.
"This decision will give Israel's citizens, will put into the
state coffers, hundreds of billions of shekels," Mr. Netanyahu said
Sunday. "This money will benefit education, health, social
welfare."
Mr. Netanyahu said the increased gas flow will also lower
consumer prices by providing cheaper energy for electricity and
manufacturing.
In addition to reducing Noble and Delek's stakes in Tamar, which
began to produce gas in 2013, the plan calls for a scheme to
regulate the price of gas for six years, when the Leviathan field
is expected to be producing gas as well.
While the development has been on hold, the industry has been
unable to finalize export deals worth billions, including some with
private buyers in Egypt and Jordan. Australia's Woodside Petroleum
Ltd. also backed out of a preliminary deal to buy a 25% stake in
Leviathan last year.
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