Noble Energy warns ruling on gas deal imperils development

Company says it’s up to the Israeli government to restore a ‘stable investment climate’ and enable tapping of Leviathan field

An aerial view of an Israeli offshore gas rig (Albatross Aerial photography/Noble Energy/Flash90/File)
An aerial view of an Israeli offshore gas rig (Albatross Aerial photography/Noble Energy/Flash90/File)

Noble Energy late Sunday lamented a ruling by Israel’s High Court of Justice earlier in the day hitting the brakes on a controversial gas deal Noble had signed with the Israeli government. The ruling, Noble warned, posed a “risk” to the future development of the country’s largest offshore field.

“The Court’s ruling, while recognizing that timely natural gas development is a matter of strategic national interest for Israel, is disappointing and represents another risk to Leviathan timing,” CEO David Stover said in a statement posted to Noble Energy’s website.

“Development of a project of this magnitude, where large investments are to be made over multiple years, requires Israel to provide a stable investment climate,” he continued, insisting that his company would “vigorously” defend rights related to its assets and while protecting the interests of its shareholders.

“It is now up to the government of Israel to deliver a solution which at least meets the terms of the Framework, and to do so quickly,” Stover added.

In its decision, the High Court declared that the deal to extract offshore natural gas would be canceled within a year unless one of its central tenets, preventing future governments from altering the terms, is significantly changed or canceled.

On Sunday evening government officials castigated the High Court decision even as opposition lawmakers, who led the petition against the accord, celebrated the development as a victory for the public.

Prime Minister Benjamin Netanyahu, who had spearheaded efforts to seal the deal between the state and gas companies, said the ruling “threatens the development of Israel’s gas reserves. Israel is regarded as a state with excessive judicial intervention, which makes it difficult to do business.

“Surely nobody can celebrate the fact that the gas is likely to remain in the depths of the sea and that hundreds of billions of shekels won’t reach the citizens of Israel,” he continued. However, the prime minister vowed to “find other ways to overcome the great damage caused to the Israeli economy because of this bizarre ruling.”

Attorney General Avichai Mandelblit said the government would respect the High Court ruling, but added that he would “examine legal solutions to allow the government to implement its policy.”

The so-called stability clause, one of the central parts of the gas deal, had ensured there would be no regulatory changes, regardless of changes in the government or changing discoveries on the amount of gas as the drilling progresses. Opponents want the gas deal regulations to remain dynamic, and argued that the stability clause is too favorable for the gas companies.

Energy Minister Yuval Steinitz called the ruling “miserable” and said its “negative consequences for developing the gas market, for energy security, for the Israeli economy, and in lost income for the State of Israel and its citizens, are liable to be even harsher — and potentially irreversible.”

By contrast, opposition leader Isaac Herzog, whose Zionist Union Knesset faction had filed the petition against the deal, welcomed the ruling. “A correct and brave decision by the High Court,” he tweeted. “The government mustn’t tie its hands and its [right to exercise] discretion.” He said the petition had “established a clear public limit for the benefit of the general citizenry and the citizens of Israel.”

Netanyahu made the gas deal a centerpiece of his agenda, performing political cartwheels to override Knesset and public opposition to it, and insisting all along that it would bring energy self-sufficiency and flood Israel’s coffers with billions of shekels in tax revenues.

He finally succeeded in signing the agreement on December 17, 2015, paving the way for a consortium of Noble Energy and the Delek Group to begin work on extracting gas from the massive Leviathan gas field off Israel’s coast, which is thought to contain some 22 trillion cubic feet of gas.

Activists have been furious with the deal’s lack of transparency, including the stability clause, and terms that they say are excessively favorable to the government’s corporate partners and cement a de facto monopoly in the local gas market.

AFP contributed to this report.

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