Israeli Gas Dreams Move Forward

Israel’s High Court of Justice must now decide whether the government of Prime Minister Benjamin Netanyahu was right in approving a controversial U.S.-Israeli partnership to develop the huge Leviathan gas field in the Mediterranean Sea, a move that would make the Jewish state an energy exporter for the first time.

Netanyahu signed the deal on Thursday under which Israel’s Delek Group and Noble Energy of Texas, which discovered the field in 2010, should maintain control of Leviathan in exchange for selling some smaller assets. Opponents of the deal, including the Israel Antitrust Authority, contend that such control of Israel’s gas resources by a single consortium would limit competition.

Netanyahu managed to win his government’s approval by citing a passage in Israel’s antitrust law, Article 52, that the issues of security and international security could trump any decision by the Antitrust Authority. That clause has never been invoked before now.

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On security, Netanyahu said Israel needs to diversify its sources of energy to keep them safe from sabotage. “This plan is vital to our security, because we don’t want to be left with one power plant that’s under fire; we need multiple gas fields,” he said.

As for diplomacy, the prime minister said, “This is essential for our foreign relations. Many countries have expressed interest [in buying the gas]. Not just Greece and Cyprus, whose leaders I am meeting in a few weeks. Jordan, and of course the Palestinian Authority as well, have shown interest. Turkey and Egypt are also interested, and we are in discussion with them.”

Delek and Noble, already working together in the past few years, have discovered major gas reserves in Israeli territory beneath the Mediterranean Sea. Already they’re producing gas from one field, called Tamar, and now they want to expand Tamar’s output and begin developing Leviathan, which is believed to hold twice as much gas as Tamar.

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So far, Tamar provides Israel with about half the gas it needs to generate electricity. Development of the Leviathan field would yield an estimated 22 trillion cubic feet of gas, worth up to $120 billion even at today’s depressed energy prices. This would make Israel not only self-sufficient in gas, but could make it a net exporter of the fuel.

But none of this will be possible without the blessing of the High Court of Justice, the country’s last legal resort. Netanyahu invoked Article 52 because the deal is opposed by the Israeli Antitrust Authority. The issue became so inflamed earlier this year that David Gilo decided to resign as antitrust commissioner, and his successor also opposes the deal.

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Opposition leader Isaac Herzog said his Zionist Union will petition the court to block the deal. “Signing off on the gas outline by means of Article 52 means using the name of Israel’s security in vain.” He said the move does “not benefit the Israeli public.”

Yael Cohen-Paran, another member of the Knesset, Israel’s parliament, and member of the Zionist Union, said, “The evidence we have accumulated in the past proves time after time that the use of Article 52 is not legal, and that public interests are being trampled in favor of tycoons.”

By Andy Tully of Oilprice.com

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