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Delek, Noble oppose emerging gas compromise

Noble Energy does not accept separate marketing, and Delek is unwilling to sell its rights in Karish and Tanin as well as Tamar.

GAS

Noble Energy is expected to oppose the separate marketing model for the Tamar and Leviathan natural gas reservoirs, and Delek Group Ltd. (TASE: DLEKG) is opposing the sale of its holdings in the Tamar field as well as the Karish, and Tanin reservoirs, according to senior natural gas sector sources.

Antitrust Authority head Prof. David Gilo has held hearings in recent days for each partner in the Leviathan reservoir: Delek Group, Noble Energy, and Ratio Oil Exploration (1992) LP (TASE:RATI.L). The hearings were conducted to determine whether Delek Group and Noble Energy’s purchase of 85% of the rights in the Leviathan reservoir from Ratio Oil was illegal, and created an agreement in restraint of trade.

Simultaneously with the legal proceedings, representatives of the Ministries of Finance and Energy met in recent weeks with Antitrust Authority representatives to formulate a compromise acceptable to all of them. Such a compromise must facilitate competition in the energy sector on the one hand, and rapid development of the Leviathan reservoir and the supply of gas from it to the local economy on the other.

According to the emerging proposal, published exclusively in “Globes, ” Delek Group will sell its holdings in the Tamar reservoir to a third party, while Noble Energy will retain its holdings in both reservoirs. The hoped for competition between the two reservoirs will be achieved through marketing of the gas to the domestic market, for which there are two main options. In the first, there will be a single marketer to the domestic market for each reservoir. Isramco Negev 2 LP (TASE: ISRA.L) will be the marketer for the Tamar reservoir, and Ratio Oil will be the marketer for the Leviathan reservoir. In the other option, all the partners in both reservoirs will be marketers, except for Noble Energy. Under this proposal, Isramco and another company that will buy Delek Group’s holdings will be the marketers for the Tamar reservoir, and Ratio Oil and Delek Group will be the marketers for Leviathan.

Senior gas sector sources believe, however that Noble Energy can be expected to oppose the separate marketing model, because this model is complicated and unsuitable for an economy like Israel’s. “A model of separate market exists in countries having a large number of customers and widespread distribution infrastructure, such as the UK, Australia, and the US, ” a senior gas sector source asserted, adding, “None of this exists in Israel.”

He continued, “The gas contracts are very complex. Besides the price of gas, agreement on other data, such as the level of take or pay (a commitment by the gas consumers to pay part of the minimum quantity of gas purchased, even if they do not need the full amount, H.C.), the maximum daily quantity (the maximum quantity guaranteed to the consumer, H.C.), and other figures is necessary. In a situation with many players and infrastructure that includes thousands of kilometers of pipeline, having several marketers is no problem, even if the customer eventually consumes more or less gas. The infrastructure can handle it easily. These countries also have gas storage.”

The same source also said that the situation in Israel is different, because it has two reservoirs and a single gas pipeline. “When Leviathan is developed, there will be two pipelines, but this infrastructure is very limited. If a reservoir has several marketers, each of whom has different top percentages and different MDQs under the agreements, it won’t work. Each of the marketers will have to ensure that it has reserves of gas and available room in the pipeline. The pipeline, however, is very limited, and there is no gas storage. How will a marketer coordinate room in the pipeline with the other marketers?”

All the government ministries agree that Delek Group and Noble Energy must sell their holdings in the Karish and Tanin reservoirs. Here, however, Delek Group is expected to object, while Noble Energy will agree, because according to the draft consent decree with Gilo agreed by the partners several months ago, Noble Energy already agreed to sell these reservoirs. No response from Noble Energy was available.

Published by Globes [online], Israel business news – www.globes-online.com

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