The emerging agreement with the natural gas companies will be presented to the political-security cabinet next week, sources inform "Globes." Today's scheduled cabinet meeting was postponed at the last minute because personal reasons prevented Minister of Defense Moshe Ya'alon from attending.
At the upcoming meeting, the regulators will present the plan to the cabinet, and ask the cabinet members to determine whether the delay in development of the gas reservoirs is jeopardizing Israel's political-security interests. The team, which has won the moniker "the Kandel team," believes that without approval of the plan, development of the reservoirs, headed by the Leviathan reservoir, is liable to be delayed for years.
The cabinet is also very anxious about the fate of the emerging gas agreements with customers in Egypt if the process is not completed by mid-July.
The cabinet's decision is needed in order to use Section 52, which allows Minister of the Economy Aryeh Deri to grant an exemption from the ban on agreements in restraint of trade to Delek Group Ltd. (TASE: DLEKG) and Noble Energy for security and political reasons. Before the order was published, the agreed plan had been scheduled for a public hearing and a discussion in the Knesset Economics Committee, which the minister is legally required to consult.
"Push gas exports ahead quickly"
"If Israel wants to export gas to Egypt, it has to take matters in hand and push gas exports ahead as fast as possible," a senior executive in Spanish gas company Union Fenosa told "Globes." He added, "Global natural gas prices are falling and will continue to fall, and Israel has to act quickly."
In May 2014, the Tamar partners signed a letter of intent with Union Fenosa, which has a gas liquefaction facility in Damietta, Egypt, to supply the company with 70 BCM over 15 years. Since Antitrust Authority director general Prof. David Gilo ruled last December that the gas sector should be restructured, however, negotiations with the Spanish company have stalled. It now turns out that Union Fenosa is unwilling to pay for a gas pipeline connecting the Tamar reservoir to the facility in Egypt.
When asked why the company had reversed itself about building the pipeline, the same executive answered that he was unwilling "to respond to internal conversations with companies. In recent months, we have continued holding talks with the companies at Tamar, and even visited Israel several weeks ago. I can say that the situation between us and the Tamar partners is complicated and difficult. The negotiations between us have reached an impasse."
Meanwhile, a report recently published by international consultancy company Ernst & Young indicates that Egypt's desire to supply gas to its local economy, combined with the shaky state of the country's gas reserves, will lead Royal Dutch Shell to sell British Gas's (BG) liquefaction facility in Idku.
"If Shell does sell British Gas's business in Egypt, the deal between Leviathan and BG is in danger," Van Leer Institute Chazan Center for Social Justice and Democracy research fellow Amnon Portugali asserts. "The Leviathan partners and BG have already been negotiating for over a year. The minute Shell sells BG's business to a third party, the entire matter will be in trouble… Obviously, the company that buys the facility can also decide to buy Israeli gas, but no one can be sure of that, and exports to Israeli gas to Egypt will be delayed by several years in any case."
The Leviathan partners signed a letter of intent with BG last June to supply 105 BCM of gas to the BG liquefaction facility at Idku, Egypt for 15 years. The value of the deal is estimated at $30 billion. One sixth of the gas reserves at Leviathan will be exported in this huge deal, which is designed to make development of Leviathan worthwhile.
No final agreement has been signed by BG and the Leviathan partners, however, due to regulatory problems. Now that Shell has entered the picture, the question arises of whether such a deal can exist at all in the future.
The partners in Tamar and Leviathan declined to respond to the report.
Published by Globes [online], Israel business news - www.globes-online.com - on June 18, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015