White House officials have been expressing concern to the Prime Minister's Bureau over Minister of Finance Yuval Steinitz's initiative to revise royalties collected by the state from oil and gas discoveries. At issue are investments by US company Noble Energy Inc. (NYSE: NBL) in the Tamar well and its oil and gas exploration in adjacent leases.
US senators have also contacted Prime Minister Benjamin Netanyahu, and the issue is on the agenda in talks with Netanyahu at the upcoming OECD Council meeting. Sources inform ''Globes'' that Noble Energy, the US partner in the Tamar discovery, considered announcing that it would suspend its operations in Israel following Steinitz's announcement that he has set up a public committee to review the royalties policy.
The US is particularly concerned about that Steinitz has publicly refused to undertake in public that the committee will not refrain from discussing retroactively increasing royalties on current leases and natural gas discoveries, including Tamar.
Sources among Tamar's partners told "Globes" that Steinitz's conduct showed "a lack of understanding and inexperience", and had already caused real damage to the project by delaying the financial closing. Foreign banks, including HSBC Holdings plc (LSE:HSBA; HKSE: 005; NYSE, Paris: HBC), Barclays Bank plc (LSE: BARC), and Deutsche Bank AG (NYSE DB; XETRA: DBG) have already told the Tamar partners that uncertainty on this point prevents them from signing the $2.8 billion financing package for the discovery's development at this time.
"Globes" has obtained an extraordinarily sharply worded letter sent to Steinitz by the US Charge d'Affaires Marc Sievers. He wrote, "The possibility that the scope of the committee's recommendations could affect future significant gas and oil finds without exempting current leases and licenses undermines confidence in the stability of Israeli fiscal policy and creates barriers to international investment. At issue is not whether the State of Israel can alter its policies, but about the transparency of its policies and the implementation of new policies."
Sievers adds, "Specifically, investors, shaken by the announcement of possible fiscal changes to be decided behind closed doors, seek written and public assurances that such changes will not be applied retroactively to existing leases and licenses. The oil and gas sector cannot tolerate uncertainty regarding such a significant parameter, and investor anxiety could halt petroleum investments and development in the current preliminary stages, undermining Israel's potential energy independence. This climate of uncertainty could ultimately affect international investment in Israel more broadly."
The Prime Minister's Bureau said that Netanyahu would shortly discuss the matter with Steinitz and Minister of National Infrastructures Uzi Landau, after Landau warned that Steinitz's initiative would severely damage Israel's national interests.
Published by Globes [online], Israel business news - www.globes-online.com - on May 20, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010