Noble Rejects Calls to Alter Gas Framework Deal With Israeli Gov’t

Energy firm’s local manager tells Knesset panel that amendments could scuttle accord.

Off Haifa coast, oil rig at enormous Leviathan natural gas field.
Albatross

Noble Energy sees the natural gas framework deal it reached with the government as final and will not agree to amend it, the U.S. energy company’s manager in Israel told the Knesset Economic Affairs Committee Monday in a stormy day of hearings on the controversial plan.

“The gas framework that has been achieved is not a draft for continued negotiations. The concession that we made over the last half year are the maximum concession we are ready to make,” said Binyamin Zomer, Noble’s country manager in Israel. “We agreed to the concession on the understanding that it was an all-inclusive package. Changing parts of the framework could lead to its collapse.”

But Yuval Steinitz, the national infrastructure, energy and water minister and the government’s point man on the talks, suggested in a radio interview that his ministry was considering opening up natural gas contracts that have already been signed. “There could be changes on the matter,” he told Radio L’lo Hafsaka. Zomer’s warnings came as the debate intensifies over how Israel’s natural gas industry will be structured and how the gas itself is priced. The government’s framework, reached in behind-the-scenes talks over the last year, has aroused a storm of criticism on the grounds that it allows the two big energy companies – Noble and Israel’s Delek Group – too much control over Israel’s gas reserves and doesn’t do enough to bring the price of gas down.

According to the framework, Delek will have to sell its stake in the Tamar field, now Israel’s only one producing gas, and Noble will have to reduce its stake, but only in six years’ time. The two will be able to keep the much bigger Leviathan field, which is under development, and which will be subject to minimal price controls.

Zomer termed it outrageous that the only foreign company willing to explore for gas in Israel is now be attacked for having done so. He noted that Noble didn’t get its drilling licenses from the state, but from other companies that sought to unload them. He also charged that the monopoly’s opponents were “distorting and lying in order to mislead the public, and prefer harming the entrepreneurs to helping consumers.”

That commented infuriated MK Tamar Zandberg (Meretz), who demanded an apology. But her wrath was reserved mainly for the government’s negotiating team and particularly for a clause in the agreement pledging that no changes in the agreement can be made for at least another 10 years.

“How did you take it upon yourselves, with no minutes and no transparency, to promise in our names that for 10 years, we won’t make any changes in the legislation going forward?” she demanded. “It would take an army of legal advisers to investigate how you agreed to strip the state and the Knesset of their powers for 10 years.”

MK: Deal is 'document of surrender'

The deal with the gas companies is not only “a document of surrender and a complete failure,” Zandberg asserted, but also gives the companies more benefits than earlier decisions already approved by the cabinet and Knesset.

MK Miki Rosenthal (Zionist Union) disputed the Infrastructure Ministry’s claim that no other drilling companies are ready to enter the Israeli market, saying the claim was contradicted by its decision to force Noble and Delek to sell off two smaller gas fields, Karish and Tanin, another element of the framework agreement.

“I checked with two companies that are interested in Israel, and nobody spoke with them,” Rosenthal said. “This is a golden goose. Did you investigate their willingness? Did you publish an international tender? How many companies did you speak with?

“On one issue, you’re not telling the truth,” he added. “If they’ll come for Karish and Tanin, they’ll also come for Tamar and Leviathan,” the much larger fields that Noble and Delek are being allowed to keep. “You’re working for Noble Energy,” Rosenthal charged.

Geologist Yossi Langotsky accused supporters of the deal with Noble and Delek of “spinning” it. “You could make a farcical play out of the nonsense they talk,” he said. “I heard Infrastructure Minister Dr. [Yuval] Steinitz, whom everyone agrees is a smart man, talking unbelievable nonsense.”

Langotsky specifically attacked the decision to let Noble and Delek export 40% of the gas. “I don’t understand the wise men of Chelm who emptied 40% of Israel’s emergency reserves,” he said. “This is stupidity, it’s national irresponsibility, to decide on this out of financial considerations.”

He added that he respects Noble’s professional capabilities and opposes the “abuse” it is getting in Israel. Nevertheless, he said, “It’s inconceivable that we should surrender unconditionally.”

“The companies are brawlers,” Langotsky said, “it’s their job to make profits. But where is the government? How is it that there’s still no second pipeline from the Tamar field to Israel? This is terrible.”

Morris Dorfman, the National Economic Council deputy chairman and a member of the government negotiating teams, said the government’s top priority was to ensure development of the gas fields as quickly as possible. “Our first and foremost priority was for rapid development of the gas reserves and only secondly to ensure competition between the fields. Before we can divide up the cake we have to make it,” he said.

David Gilo, the outgoing antitrust commissioner who spurred the controversy in December by rescinding an earlier agreement he had made with Delek and Noble, said he gave consideration to the national security concerns of the government in weighing how to break up the gas cartel. “I agreed to work hard to reach an agreed solution and agreed to a certain limit to competition. Unfortunately the model that was reached doesn’t bring competition,” he said.