Uncertainty looms over the Jordanian-Israeli gas deal
The future of Israel’s gas is unclear after the country’s Antitrust Authority commissioner David Gilo announced on December 23 that Delek and Noble’s control of the Leviathan (estimated at 22 Tcf) and Tamar (estimated at 10 Tcf) gas fields constituted a cartel. Delek and Avner own 45 per cent of Leviathan, and Noble owns 40 per cent. The announcement will be followed by a hearing between the market competition regulator and the Israeli-American consortium before a final decision is taken. Gilo’s announcement came as a surprise given he had previously agreed that Noble and Delek would be permitted to pursue their participation in Tamar and Leviathan on the condition two smaller fields, Karish and Tanin, were sold. Noble and Delek rejected the possibility they would be forced to sell their shares in Israel’s largest fields and declared they would seek international arbitration to reach a settlement if necessary.
The uncertainty over the future ownership of Israel’s Tamar and Leviathan is a veritable concern for Israel’s energy industry. The possibility that the companies controlling the fields will be forced to sell their assets or break their partnership is a major deterrent for international investors. The Leviathan field was set to begin production in 2018. Israel’s regional pipeline ambition is also at risk. Israel’s immediate neighbour, Jordan, has interrupted talks to import natural gas from Israel.
A letter of intent was signed between Jordan and Israel on 3 September 2014 stipulating that the partners in Israel’s Leviathan would supply Jordan’s National Electric Power Co. natural gas over the period of 15 years with a deal value of $15 billion. Jordan has been suffering from the disruption in the flow of natural gas from its previous supplier, Egypt, and has been looking for alternative suppliers to ease its spiking energy bill.
The dispute between Israel’s competition regulator and the Leviathan’s stakeholders is jeopardizing Israel’s regional strategy. In June 2013, Israel’s cabinet approved a gas export quota of around 40% of the country’s proven reserves. The decision was ratified in October 2013 by Israel’s High Court of Justice. All signs indicated that prior to finalising an export strategy, Israel was considering supplying natural gas to its immediate surrounding, Jordan, Egypt and the Palestinian Authority. The possibility of natural gas imports from Israel had triggered domestic anger in Jordan. Activists and political parties publically opposed any gas deal with Israel. To the complicated regional landscape is now added regulatory hurdles that may impede Israel’s entry into the gas export market.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat