The government’s Committee for Reducing Business Concentration is recommending that the Energy Ministry bar bids from Chevron and Delek Drilling for gas-exploration licenses being offered in Block 72, citing Delek’s grip on the economy.
The two companies, which now control the lion’s share of Israeli natural gas production through their Tamar and Leviathan fields, were one of two groups that bid in September for rights to Block 72. The other is the Greek energy company Energean, which operates the much smaller Karish and Tanin fields.
But the committee, which is headed by Michal Halperin, the competition commissioner, noted that Delek already controls half the natural gas production nationwide. Awarding it Block 72 would enhance the already immense power of Delek’s controlling shareholder, Yitzhak Tshuva, over the economy.
“The Tshuva group has considerable bargaining power and influence over policymakers. In addition to the economic and strategic importance of its holdings, disruptions or cessation of its reservoir operations or the transmission system under its control would have a tremendous and immediate effect on the energy sector, which relies on natural gas to generate electricity,” said the committee.
“Awarding a license for Block 72 is likely to increase its [Tshuva’s] bargaining power and influence over the government in other areas in which it operates today,” the panel concluded.
The Energy Ministry said it had accepted the committee’s stance and was now examining options. Sources at Delek termed it a “puzzling” decision.
“We can only hope that it didn’t arise from improper and self-interested outside pressure. The government itself had told the High Court that we would bid in a competitive process. Those who can compete have the right to also win,” one said.
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Preliminary tests carried out in the past show that Block 72 has a geological structure similar to other proven gas reservoirs in the area, such as Karish and Tamar. It covers 400 square kilometers adjacent to the northern limit of Israeli economic waters and close to the disputed maritime border with Lebanon.
Exploration rights to Block 72 – at the time known as the Alon D block – were awarded to Delek’s Delek Drilling unit and Noble Energy, which was acquired by Chevron last year, in a controversial 2009 decision. However, in 2017, the ministry rescinded the license after the partners failed over seven years to begin exploratory drilling, despite three deadline extensions.
Last January, Energy Minister Yuval Steinitz opened Block 72 to competitive bidding following two rounds of bidding in 2016 and 2018 in which Israel awarded 18 licenses for oil and natural gas exploration in other offshore blocks.
Delek-Chevron’s bidding for Block 72 had elicited strong opposition from social-justice groups such as the Movement for Quality Government in Israel and Lobby 99.
Citing the market share the group already held, Lobby 99 had said last month that the decision on Block 72 was critical. “The Energy Ministry can make a decision that further harms competition in the gas industry, which is in its infancy, or it can act in favor of promoting competition and reducing concentration.”