"We'd like the Tzemach Committee to allow us to export more gas, but we support the recommendations made," Noble Energy Inc. (NYSE: NBL) chairman and CEO Charles Davidson said at a press conference today.
Commenting on his meeting with Prime Minister Benjamin Netanyahu, Davidson said, "There was agreement on the need for a decision by the Israeli government on gas exports soon. I don’t know the timetable for a decision on the matter, but I encouraged the prime minister to move forward as fast as possible."
Davidson added that if exports were reduced, "we will very soon reach the critical threshold of financial worthwhileness of gas exports. The gas here is very dry, and there are few substances besides the gas, which is why we strongly support approval of the recommendations as is."
Asked about the changes in taxation following the Sheshinski Committee, Davidson said, "I try not to think about this, but it was a delicate matter, because they raised the tax after we had already invested, which is very unusual in our industry. If a government adopts the practice of raising taxes retroactively, at some point this drives away foreign investors. My feeling is that if the government does this again, it will drive away investors. I don’t know this for a fact, but I felt that there were companies which wanted to invest in Israel, but changed their minds because of Sheshinski. When we were looking for a partner for Leviathan, there were several companies which were deterred by this. Israel felt that its tax regime was obsolete, and that it was different from what Israel believes is an appropriate tax. I accept this, and we're continuing to invest on the assumption that the matter is closed. If it is reopened, we'll have to reconsider our activity here."
It should be pointed out that, according to the Ministry of Finance announcement yesterday, the committee that Minister of Finance Yair Lapid intends to apoint to examine taxation of natural resources will not review taxation of gas reserves.
Davidson said that Noble Energy was examining various gas export options, and that the necessary starting investment was $5 billion. "Noble Energy is examining various options for exporting gas via a floating or onshore LNG facility. There are a number of voices calling for gas to be handled here in Israel," he said, adding, "I believe that it's possible to find an onshore site, and potential sites have been examined. Israel has refineries and petrochemicals companies, and this is no different. You need a site near the sea so ships can come close."
As for the exploratory drilling to oil target strata that Noble Energy is planning at Leviathan in early 2014, Davidson said, "There was very high pressure at great depth in the previous well we drilled, which is why we ordered construction in South Korea of a special rig, which will begin drilling at the end of the year. The drilling itself is very substantial, and could take five months.
"We have to decide on the development of the Leviathan field and linking it to the shore this year. We cannot begin development of Leviathan without a decision on exports. In the Sheshinski case, this happened after we had already invested $1 billion in developing Tamar, but Leviathan is not Tamar, because Tamar had a guaranteed market, but Leviathan has no such market except for exports. I am very supportive of the process that Israel is undertaking. There is a fantastic opportunity here, but I want to make sure that all the parties involved understand that delaying decisions carries a price. It will delay Israel's revenues from royalties and taxes on gas sales."
Published by Globes [online], Israel business news - www.globes-online.com - on April 11, 2013
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