Israel's Antitrust Authority Resists Pressure From Leviathan Partners

Commissioner warns Delek, Noble and Ratio they could face lawsuit if they reject compromise plan.

The Israel Antitrust Authority has told the partners in the Leviathan natural gas field that unless a compromise is reached to reduce their dominance of Israel’s natural gas market, they will face an antitrust case in court.

The IAA’s warning comes after the partners in the giant field − Delek Group, Noble Energy of the United States and Ratio Oil Exploration − applied immense pressure on officials not to order them to reduce their stakes in Leviathan. The heads of the three companies, including Delek Group’s controlling shareholder Yitzhak Tshuva, met with Antitrust Commissioner David Gilo in recent days in an effort to dissuade him from declaring their partnership a cartel, or at least receive better terms. Gilo is expected to rule on the matter this month.

Delek owns 45% of Leviathan through its Avner and Delek Drilling units, while Noble Energy controls 40% and Ratio 15%. The three are in talks with Australia’s Woodside Petroleum to take a stake of between 25% and 30%, which would dilute their shares proportionately.

As first reported in TheMarker, to prevent any delays in developing the Leviathan field, the IAA is considering allowing Delek and Noble to sell their rights in smaller gas fields closer to Israel’s coast and allow them retain their holdings in Leviathan. Delek and Noble would sell to a third party their rights to the Karish and Tanin natural gas fields, which have an estimated 50 billion and 30 billion cubic meters in natural gas reserves, respectively. Another yet-to-be-named concession would be sold to the third party to allow it to reach a size that would enable it to effectively compete with Delek and Noble Energy in the local natural gas market.

The government has demanded the additional concession to Leviathan, to ensure that the development of the field will be done in a way that shores up competition in the natural gas market. In addition, the Antitrust Authority is demanding that Delek and Noble commit to a set timetable for selling their rights, to prevent dragging out the agreement’s implementation.

Delek and Noble Energy have already rejected these conditions and are seeking an alternative arrangement, under which the additional natural gas required for the package deal would come from the Tamar field’s satellite field Tamar Southwest. They have also been adamant about maintaining the rights to sell any oil discovered in the fields.

In a related development, Bloomberg News reported this week that senior officials in the region said that the construction of a natural gas pipeline between Israel and Jordan would begin sometime in 2015 and be completed in 2016. The pipeline is the subject of talks between Delek, Noble and the Jordanian government to supply Jordan’s Dead Sea potash plants with natural gas. The plants are operated by Canadian producer Potash Corporation of Saskatchewan.

Some 88% of Jordan’s energy needs are supplied by natural gas. According to estimates, Jordan requires an additional 2-3 billion cubic meters of natural gas annually beyond what it gets from Egypt, which has become an unreliable supplier in the years since Hosni Mubarak was toppled from power. However, fulfilling the demand would require expanding Jordan’s limited infrastructure for transporting natural gas. Jordan’s current estimated natural gas consumption is half a billion cubic meters, primarily used by the Dead Sea plant.

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