Chevron BuyoutThe Americans Saw the Suckers in Israel and Realized Noble Energy Was a Great Deal

Israelis lacked flexibility and daring to buy out Noble Energy's stake of reservoirs that could have increased public’s disposable income by 3-4 billion shekels a year. Chevron saw an opportunity

Avi Bar-Eli
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Prime Minister Benjamin Netanyahu (R) and Energy Minister Yuval Steinitz  during the inauguration of the foundation platform for the Leviathan natural gas field, on January 31, 2019.
Avi Bar-Eli

The coronavirus has hit the global demand for oil hard. Surplus inventory even brought the price of oil into negative territory for a moment. One after another, oil wells in the United States were shut down. Small oil companies and those who relied on shale oil were on the shelf for immediate sale. Those who entered the crisis on shaky ground, like the heavily bleeding Noble Energy, were desperate to be bought out.

Israelis did not have the cognitive flexibility and business daring to exploit 1 or 2 percent of the Bank of Israel’s foreign currency reserves to buy out Noble Energy’s share of the Tamar and Leviathan strategic natural gas reservoirs. By doing so, we could have lowered the price of the gas and increased the Israeli public’s disposable income by 3 to 4 billion shekels a year. As opposed to Israel, Chevron, which recently began a reorganization of its portfolio, went for the deal.

Chevron bought Noble for half the price at which it sold its assets in the North Sea to Yitzhak Tshuva, controlling shareholder of the Delek Group, a year ago. So instead of Chevron buying out Tshuva in the Tamar or Leviathan fields and rescuing him from the sword of bankruptcy resting (because of Chevron) on his neck, Tshuva may well discover that those who did a number on him last year are now sitting alongside him on the board of directors as dominant partners with an operator’s contract in their hands.

Chevron reported to investors on Monday that it expects Noble’s assets in Israel “to generate strong returns and cash flow with low capital requirements.” This is how it is when the suckers in Zion buy their natural gas at $6.30 (per thermal unit), compared to the selling price of $1.70 in the United States – years after the costs of exploration and development of the owners have been covered, thrice over.

An entrance sign at the Chevron refinery, Pasadena, Texas, U.S., May 5, 2019.
An entrance sign at the Chevron refinery, Pasadena, Texas, U.S., May 5, 2019. Credit: Loren Elliott/ REUTERS

In 2021, the Israel Electric Corporation will have the opportunity to lower the price of the gas in the draconian contract with Tamar – but it seems that the government company will make do with just a reduction of up to 25 percent, instead of at least 50 percent. And as if that weren’t enough, in the past two weeks it has become clear that the electric company did not make do with just screwing over the public with the exorbitant Tamar deal from 2012 – it added to the sin and screwed the public a second time. This was when it committed to buy gas from Leviathan at a rate of $4.80, even though it could import gas at $3 or even less.

This is the result of a situation lacking oversight and enforcement, and this is the result when you work under the cover of a cost-plus model’s guaranteed rates. And where indeed was the government hiding today?

The cabinet convened to discuss the strategic significance of a major oil company’s entry into the Israeli market. Ministers heard a survey of the business potential involved in the arrival in Israel of the second-largest oil company in the U.S., and also about the importance of strengthening the U.S. hold on the Israel-Cyprus-Egypt triangle against the Iran-Turkey-Russia axis. After that, the cabinet was updated about the risks implied by the entry of giant multinationals such as Chevron for the Competition Authority, which was already hesitant to dismantle the Delek-Noble cartel in the Tamar and Leviathan fields, and about the risk that entry implies from now on to changes in regulation or full tax collection from the gas field partners.

Finance Minister Yisrael Katz at the Finance Minister, Jerusalem, July 1, 2020
Finance Minister Yisrael Katz at the Finance Minister, Jerusalem, July 1, 2020Credit: Emil Salman

In the end, the ministers were informed about the timing of the deal – 24 hours after the Israeli government approved its participation in the funding of a controversial gas pipeline to Europe – while in practice giving up its rights in Cyprus’s Aphrodite gas field, in which, completely by coincidence, Chevron holds 35 percent of the rights.

What is described above is of course daydreaming. None of these questions were asked, and the ministers don’t care about the price of natural gas. The colonialists from California, who for a century have been making deals with the tribes in the Persian Gulf, know who they are dealing with.

Just a few hours before they reported on the deal’s signing, Chevron execs turned on the television and saw the natives in their new province shooting – socially distanced – burning arrows around the campfire: the finance minister accused the coalition whip of making sure the coronavirus grant would go to his cousin, while the whip threatened in response to expose the business ventures of his the finance minister’s wife, all while the energy minister took pride in the deal that is “an enormous expression of confidence in the Israeli energy economy.” Indeed, you can trust that the suckers will not wise up.

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