Deal Frees Delek, Noble Energy From Monopoly Status

The trade-off: Pair must sell their rights to Karish and Tanin offshore gas sites

Antitrust Commissioner David Gilo has approved a compromise plan that would call for the Delek Group and U.S.-based Noble Energy to divest of their interests in two smaller Mediterranean offshore gas exploration sites, the purpose being to free themselves of a ruling two years ago that their holdings in the larger Leviathan and Tamar sites constitute a monopolistic restraint of trade.

The settlement with the antitrust commissioner, reached Tuesday, calls on the two firms to divest of their natural gas interests in the relatively small Karish and Tanin offshore sites, which have combined proven reserves of 70 billion cubic meters of gas, in addition to potential finds of an additional 26.6 billion cubic meters. Gas from the sites will be designated for domestic consumption in Israel.

To avoid undermining Delek and Noble’s bargaining power, the government has not disclosed what deadline the companies have been given to divest of their rights at the two smaller sites. The time frame, however, is thought to be relatively short so it can be assumed the two companies are already engaged in feelers over the sale of the rights.

The resolution of this issue still leaves other, lesser matters to be resolved with the Antitrust Commission, but that is expected in the coming weeks as well, paving the way for Woodside Petroleum, the Australian energy giant, to take a 25% stake in Leviathan, which holds Israel’s largest gas reserves. That would dilute Delek’s subsidiaries’ 45% stake in the venture as well as Noble’s 40% and the Ratio Oil Exploration’s 10% stake.

The Antitrust Commission is only requiring that Delek and Noble divest of their interest in the natural gas at Karish and Tanin. It would allow them to retain the rights to any oil found there. It is not clear, however, how such a division of interests would be carried out and what the stance of the Energy and Water Resources Ministry will be on the matter.

Development of the Tanin and Karish sites will not be limited and theoretically any new operator of the sites would be able save on development expenses by making use of infrastructure owned by Delek and Noble to transport the natural gas to shore.

Eliran Avtial