Lawson Freeman, a tall and amiable Texan, managed Noble Energy's activity in Israel until two years ago. Before he returned to the US, he was asked what he would take back with him from the years he worked in Israel, beyond the usual things. "One sentence," Freeman replied, "'We've been thinking'."
That sentence sums up the Israel experience for Noble Energy. The company's culture values more than anything a handshake and mutual trust. The picture on the wall of its dining room shows two cowboys shaking hands. That's how they do business in Texas. Without contracts and lawyers.
But the Israelis, every time you reach an understanding with them, announce that they want to change and amend. To rethink. In Texas they don't do business with anyone whose word can't be relied on, but Noble Energy doesn't have much choice. In the current situation, as the plunge in gas and oil prices threatens to spell disaster for its investment in gas fracking in the US, Noble Energy is clinging with all its might to the gas reserves in Israel, to the fantastic flow from Tamar, to the gas sold at stable prices thanks to the obstinacy of the Israeli regulator. So the Americans grit their teeth and carry on.
All this is a lead up to one thing: the stability clause in the natural gas framework is not just another clause up for negotiation as far as Noble Energy is concerned. This is the core of the agreement. It is indispensable. Without it, there is no framework.
It makes no real difference to the Americans whether the clause is passed through legislation or not. As far as they are concerned, nothing Israel does is to be relied on. They are pinning their hopes on international arbitration.
It's no secret that the Kandel team that conducted the negotiations on the natural gas framework did not like the stability clause. As reported here in the past, the signing of the framework was delayed because of the demand by Deputy Attorney General Adv. Avi Licht that the scope of the clause should be narrowed. Licht knew what he was talking about. The hint that the judges of the High Court of Justice gave the government could not have been broader: "The stability clause in the framework cannot be allowed to pass in its current form."
Section 52, taxation changes, so-called diplomatic considerations - all these things could somehow be smoothed over. But the stability clause was too much for the judges to swallow. As predicted here a week ago, the stability clause is the cause of the instability of the whole framework.
The High Court of Justice is not keen to take upon itself to wreck the gas framework, even without the prophecies of doom from Netanyahu and Steinitz. The question now is, what will the government do? Will it pull the High Court of Justice's chestnuts out of the fire for it? The legislation option is not on the agenda. There is no chance that Netanyahu will go back to the Knesset with the gas framework. The State Attorney's Office has been tasked with producing a creative solution - and it has seven days in which to do so.
Published by Globes [online], Israel business news - www.globes-online.com - on February 15, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016