Noble Energy: We expect Tamar to be excluded from any oil royalty changes

Noble Energy, the American partner leading the consortium that's been drilling for natural gas off Israel's coast, told analysts and business reporters on Friday that it expects the Tamar field to be protected from any changes in Israel's royalty regime. The comments came during a question-and-answer session that followed the company's second-quarter earnings report.

	Charles Davidson
	Photo by: Ofer Vaknin

Other highlights of Friday's Q&A: The Israeli government is open to exporting natural gas from the Leviathan field, and no decision has yet been made concerning the number and location of onshore reception terminals for the natural gas from the offshore fields.

"Well, I think what is at issue now is that there's probably not going to be two or three onshore terminals here, but probably one," Noble Energy CEO and chairman Charles Davidson said, responding to a question posed by Citigroup analyst Bob Morris about the controversial plan to build an onshore terminal in the Haifa area.

Last month, National Infrastructure Minister Uzi Landau declared the plan to build a terminal at Dor Beach a dead letter and instructed the National Planning and Building Committee to find another site in the north for an onshore terminal. Area residents claimed victory this weekend in their fight against the terminal (see story, Page 3 ), but Davidson made no mention of that development and took a different tack.

"If you are to build an onshore terminal for Tamar and then you have a discovery at Leviathan that may require a dramatically larger scope of facilities, you may have made a mistake," he said. "It might be better to wait until you see the results of the exploration and then go for an onshore terminal that really fits the full development scope, rather than the initial discovery."

According to Davidson, the gas from Tamar is set to flow through an undersea pipeline to the partnership's existing infrastructure by the end of 2012. By "existing infrastructure," Davidson meant the Tethys Sea offshore platform near Ashkelon and its pipelines.

Noble president and chief operating officer David Stover weighed in on the royalties issue after David Wheeler, an analyst from Alliance Capital, asked whether the company expected the Tamar find to be grandfathered and thus excluded from a change to Israel's royalties arrangement.

"It is certainly our expectation that Tamar would be grandfathered," Stover said. "It was an existing discovery and there's a very strong argument to be made that it would not be part of any change in either taxes or royalty."

Davidson told the analysts and journalists on Friday that Israeli officials are open to the idea of natural gas exports and have given their assurance that "as long as we can demonstrate that we can adequately supply their market, they will certainly not stand in the way of a company developing the assets and recognizing the economic benefits for the State of Israel as a result."

On the number-crunching side, Noble Energy announced a 27.4% increase in the volume of natural gas sales in Israel from the Tethys Sea field. The volume jumped from an average of 95 million cubic feet per day in March-June 2009, to 121 MMcfpd during the same period this year. The average price of natural gas supplied from Israel in this period rose by 57% from the second quarter of 2009 to the parallel quarter of 2010, and from $2.76 to $4.33 per thousand cubic feet.