Only Four Firms Have Shown Interest in Israeli Offshore Drilling Rights

Poor response leads Energy Ministry to extend application deadline by two months, to July.

Albatross

Three months after Israel invited companies to bid for drilling licenses in its economic waters, only four have expressed an interest and the National Infrastructure, Energy and Water Resources Ministry is extending the filing deadline to file by two months.

TheMarker has learned that the four include Energean Oil & Gas, the Greek company that bought the tiny Karish and Tanin natural gas fields in December, and Edison, an Italian company that owns 20% of the Roi and adjacent licenses.

In addition, there was a surprise bid from the Spanish company Repsol and a fourth bid for an unnamed Israeli group.

Energy Minster Yuval Steinitz tried to put a positive spin in announcing on Thursday that the government was extending the deadline to July 10.

In recent months we have held several meetings to encourage energy companies to join in the competition to develop [Israels] economic waters, Steinitz said. In light of the repeated requests and great interest weve seen we have decided to extend the competitive process and let companies to examine it further and take part.

Sources said the government planned another round of road shows in key energy centers like London and Houston, Texas. However, pushing back the deadline makes it likely that no licenses will be awarded until at least the end of 2017.

Israel began accepting bids in November from energy companies to drill for oil and gas in 24 offshore blocks, each one up to 400 square kilometers, with the aim of accelerating exploration and production. Applications cost just 50,000 shekels ($13,300).

Israel aimed to boost competition in the local market for natural gas, which is dominated by the Delek Group and Noble Energy, and to increase exporting prospects. But the move came as the worlds petroleum sector, reeling from low prices, sharply reduced new drilling.

Another issue for potential bidders is the absence of clearly defined markets for any gas or oil they find. The domestic market is pretty much sewn up, and efforts to find new uses for gas in manufacturing and transportation have stumbled.

On the export side, no agreement with Turkey has been reached despite warming diplomatic relations, while and a big offshore find in Egypt has raised doubts about exports to that market.

Nevertheless, National Infrastructure, Energy and Water Resources Ministry Director General Shaul Meridor said he remained optimistic. He said the state will spend significantly on natural-gas infrastructure this year in a bid to boost demand. Potential demand for gas in the Israeli market is still in its infancy, Meridor said.

Meanwhile, TheMarker has learned that Steinitz has quietly promised that Israel will do nothing to hurt gas exports to Jordan over the 15-year life of a contract the two countries signed.

The exact contents of the letter delivered to the Jordanian government arent known but they seem to echo the stability clause that Israels High Court of Justice struck down in March. In it, the government committed to making no changes to the gas framework agreement.

The letter follows an agreement reached in September by the partners in Israels Leviathan gas field, led by Delek and Noble, to supply Jordans National Electric Power Company with natural gas over a period of 15 years, in a deal valued at $10 billion.

The commitment, which was made at Ammans request does not specify the level of government that made the promise or whether any regulators involved approved it. Moreover, Jordan is not believed to have made any written commitment to buy the gas.