Energy Stocks Plunge After Regulator Targets Gas 'Monopoly'

Antitrust commissioner revokes compromise deal that allowed Delek, Noble Energy to retain their holdings in the Tamar and Leviathan gas fields.

Albatross

Antitrust Commissioner David Gilo has announced that he was revoking a compromise deal he made three years ago with Yitzhak Tshuva’s Delek Group and Noble Energy. The deal allowed Delek and Noble Energy to retain their holdings in to the Tamar and Leviathan gas fields in exchange for selling off the smaller Tanin and Karish fields.

Following the announcement, Leviathan shares plummeted, sending down the Israeli oil and gas index by 11%.

At mid-day Ratio was down 22%, Avner 17%, Delek Drilling was losing 15.5% and the Delek Group holding company was losing 16%. Isramco was down a relatively minor 5%. The Tel Aviv Stock Exchange has halted trading in all the oil and gas shares, as is the custom in the case of an extreme change.

Gilo met with businessman Tshuva on Monday night after it was reported that he was reconsidering the arrangement. In their meeting, Tshuva tried to convince Gilo not to change his earlier decision.

Gilo told Delek and Noble representatives that after consultations with professionals in the field he had concluded that his earlier understanding with them would not enable free competition in the marketing of natural gas. Gilo will now have to decide whether to limit his decision and declare a binding agreement that will regulate the operation of the Leviathan field or whether to ask the court to order the breakup of the monopoly, forcing these two companies to sell their holdings in one of the two gas fields.

The final decision  is pending a hearing that will be held in two weeks with representatives of the two companies.

At Monday’s meeting Tshuva appealed in person to Gilo, asking him to carefully consider his decision so as not to drag the two sides into a prolonged legal battle which would hold up the development of the Leviathan field. Noble Energy’s representative at the meeting read out the company’s statement, stating that if Gilo appeals to the Antitrust Court the company would make a counter-appeal to courts in Israel and overseas.

The Antitrust Authority explained its reversal, stating that “in recent months it has become clear that the previous deal’s benefit to the public was smaller than the alternative, due to new circumstances. The Authority has obtained indications that the previous agreement would not deliver solutions that would enhance competition and reduce the monopoly in the natural gas market. Several governmental agencies were basin their operations on the earlier deal, but it is now important that these bodies act to foster more competition in the area.”

Referring to the criticism voiced by the gas companies, the Authority’s announcement added: “the Authority is aware of the fact that its decision will have an economic impact, so it calls on all government agencies to work in concert and vigorously to minimize any negative impact. Despite potential negative implications, the Authority believes that a thorough overhaul is required in order to bring about a solution to the problem posed by monopolies in the local market.” 

"I am pained by the turn of events," Tshuva told Army Radio on Tuesday morning. “Why should I be a victim after investing so much of my money? Five years have been wasted. Let’s not forget the large anticipated revenues for Israel and the Israel Electric Company.” Tshuva added that “if a decision is made, forcing us to sell Leviathan, this will reduce Israel’s credit rating and create problems with regard to international agreements Israel has signed.”

Idan Wallace, the director of Tshuva Holdings which owns the Leviathan gas field, told Army Radio that “if the antitrust commissioner does not allow us to keep the Leviathan and Tamar fields, the cost of living in Israel will see a further and significant rise."

Attorney Gilad Barnea, one of the petitioners against the monopoly, said in response that natural gas belongs to the public. “Tshuva didn’t invent this gas, he was just lucky. He invested money but there are currently many others standing in line, waiting to invest."