Noble Energy Suspends Development of Gas Projects Amid Regulatory Uncertainty

Partner in offshore fields says it’s waiting for final decision on monopoly status; Energy Ministry sides with the producers and lambastes Antitrust Commissioner

Offshore Leviathan natural gas drilling site.
Albatross

Noble Energy signaled on Wednesday that it was suspending further development of the Leviathan and Tamar gas fields until Israel makes a final decision on resolving the natural gas monopoly and other regulatory matters.

“We are disappointed in this latest communication from the Antitrust Authority,” David Stover, CEO of the Texas-based company, said in a statement. “Final resolution of this item, as well as a number of other regulatory matters, is required before we proceed with additional exploration or development investments in our Israel business.”

The warning came a day after Antitrust Commissioner David Gilo said he was rescinding an agreement he had reached with Noble and Delek Group last March that would have allowed the two companies to retain majority stakes in Israel’s two biggest gas fields, Tamar and Leviathan, even though it would leave them controlling more than 90% of the country’s gas reserves.

Gilo has not yet decided how he will act to break up the monopoly, but analysts have said any move will likely delay the start of production at Leviathan, which has been scheduled to begin in 2018, by two years while a new regulatory framework is prepared and, as is likely, Noble and/or Delek have to sell stakes in the field. Tamar has been in production since March 2013.

Delek, a holding company controlled by Yitzhak Tshuva, reportedly offered in a meeting with Gilo late on Monday to split up the marketing and sales operations of the Leviathan field between the two companies so that they would compete with other.

Noble, however, appears to be taking a more aggressive stance, saying on Wednesday it would fight Gilo’s policy reversal and did not publicly at least, offer any counter-proposals. Noble said that the company and its partners had requested a hearing with the Antitrust Authority, which is expected to he held in the next “few weeks.” 

“The actions of the Antitrust Authority are another disturbing example of the uncertain regulatory environment in Israel,” said Charles Davidson, Noble’s chairman and former CEO. “Specifically, this is a matter that we believed was resolved some time ago and follows on recent assurances from the Antitrust Authority that approval was forthcoming.  We believe this is a harmful precedent for Israel to set and we will vigorously defend our rights relating to our assets.” 

Shares of Noble have fallen more than 4% in New York since news of Gilo’s about-face on Monday.

But in Tel Aviv Stock Exchange trading Wednesday, energy shares were rebounding strongly after two days of sharp declines. Delek Group was up 6% in the early afternoon at 965 shekels ($246.26) while its subsidiaries Delek Drilling and Avner were both ahead about 2.5% to 14.73 and 2.69, respectively. Ratio, another Levaitahn partner, advanced 5.5% to 33 agorot.