Israeli Offshore Drilling Rights Draw Just Two Bids Despite Deadline Extensions

One was from Greece’s Energean, which already has the rights to Israel’s Karish and Tanin fields. The other was from a consortium of Indian firms

File photo: An aerial photo of the Tamar natural gas rig, located 90 kilometers west of the city of Haifa, northern Israel.

After twice extending the deadline in the hopes of attracting top-line international companies, the National Infrastructure, Energy and Water Ministry said Wednesday that a call for bids for gas and oil drilling rights drew only two bidders.

One was from Greece’s Energean, which already has the rights to Israel’s Karish and Tanin fields. The other was from a consortium of Indian firms including ONGC Videsh, Bharat PetroResources, Indian Oil Corporation and Oil India.

No Israeli companies submitted offers, indicating that they were unable to recruit an overseas operating partner for their bids.

A ministry official who asked not to be identified said the process shouldn’t be looked on as a failure. “It’s not much, but we should not disparage the fact that we got two international companies,” he said.

The ministry said it would spend the coming weeks examining each bidder’s offer and work plan before making a final decision. It said it will hold another bidding round next year.

The government had hoped it would draw at least two or three foreign companies to bid to drill in 24 new offshore blocks in Israel’s Mediterranean waters, each of about 400 square kilometers, in a bidding round that began a year ago. The licenses are for three years, with an option to extended them.

The tepid response to the call for bids came amid another setback for Israel’s energy industry after the Egyptian energy minister said on Wednesday that he expected the country would have no need to import natural gas and may even become an exporter (see story in The Ticker on this page).

Energy Minister Yuval Steinitz has termed the call for bids that was ended on Wednesday as simply the first stage of a process aimed realizing the full potential of Israel’s energy reserves. He said the ministry plans to issue another call for bids next year, which would incorporate lessons learned from the first round.

A study conducted by Paris-based firm Beicip-Franlab that estimated there are still 2.137 billion cubic meters of natural gas and 6.6 billion barrels of oil to be discovered in Israeli waters.

Moreover, this week the Energy Ministry said it wanted between 75% and 80% of all electric power in Israel to be generated by natural gas from the year, an increase in gas’ role that will increase demand and perhaps lure more bidders in the next tender.

However, future tenders face the fact that energy prices remain low and little new drilling is occurring anywhere around the world.

The original deadline for bid submissions was April. It was extended to July after only four companies purchased the data package needed to participate in the call for bids. The deadline was extended again, to November, after only one company, Energean, submitted a bid.

Energean is interested in the tender because it wants to take control of licenses between its Karish and Tanin fields. This week Reuters reported that the company was weighing an initial public offering in London in order to raise the $1.5 billion it needs to bring them into production.