Sale of Tanin and Karish Gas Fields to Proceed
The owners of the Tanin and Karish fields, two natural gas fields located off the Israeli coast and estimated at a combined 3 trillion cubic feet of gas (Tcf) are set to proceed with the sale of the two gas fields as part of a plan proposed by the Israeli government. The sale of Tanin and Karish, considered small in size in comparison to the larger 11 Tcf Tamar field and 22 Tcf Leviathan field, is part of an effort to break a cartel. Texan Noble Energy and Israel’s Delek Drilling and Avner Oil Exploration were accused by Israel's Antitrust Authority of forming a cartel that would distort competition in the domestic natural gas market and affect the price of natural gas for the private consumer. In December 2014, Israel’s antitrust commissioner announced that Noble Energy and Delek Group controlled most of the shares in the gas fields in Israel’s Exclusive Economic Zone and hence constituted a monopoly.
The dispute between the Leviathan partners and the competition regulator spurred fears that production from the Leviathan will be delayed beyond 2018, which may jeopardize regional deals with Egypt and Jordan. After a lengthy debate that divided the political class, the government issued a proposal that would allow the partners to pursue their partnership on the condition they sold Tanin and karish estimated at $1.5 billion. Delek will also have six years to sell its 31.25% stake in the Tamar field, and Noble to reduce its Tamar stake to 25% from 36%. Noble and Delek will keep control of the Leviathan.
The government's proposal was not unanimously accepted by the Israelis as some considered it too lenient and siding with Noble against the interest of the public. They fear that allowing Noble and Delek Group retain shares in Israel's largest offshore fields will result in high prices for the private and commercial consumer. The resolution of the dispute has however the merit of allowing progress in Israel's hydrocarbon industry. Analysts say regulatory certainty is a key element for Israel to successfully develop its offshore fields, retain investors and enter the export market. Israel and its Eastern Mediterranean neighbours have the ambition to sell gas beyond regional markets, to Europe. Egypt's unused export terminals could allow Cyprus and Israel a route to far-reaching destinations.
Karen Ayat is an analyst and Associate Partner at Natural Gas Europe focused on energy geopolitics. Karen is also a co-founder of the Lebanese Oil and Gas Initiative (LOGI). She holds an LLM in Commercial Law from City University London and a Bachelor of Laws from Université Saint Joseph in Beirut. Email Karen karen@minoils.com Follow her on Twitter: @karenayat