Israel's State Comptroller Steps in to Examine Concession Transfer Question

On several occasions now, Noble Energy, the leading partner in the Israeli gas monopoly, has worried government officials when it has implied that it would resort to an arbitration with the state of Israel if its demands are not met. There's no certainty those threats would disappear even if the natural gas regulatory framework, in progress currently, is approved. So, in order to take Israel to arbitration, Noble has established a company in Cyprus in order to handle its Israeli gas projects.

Unlike the U.S., Cyprus has a bilateral commercial agreement with Israel that permits claims to be made to the ICC arbitration panel. Israeli officials are concerned that an arbitration would delay the development of the Leviathan gas field by years. Such a delay would have a negative impact on Israel's energy security, not to mention government revenues.

However the arbitration option can be valid only if Noble Energy, the U.S. entity, transfers its rights to the Israeli project to a Cypriot entity. That transfer has to be approved by Israel's Energy Ministry. So far it isn't clear if such an approval was either asked for by Noble or an approval was given by the Energy Ministry, which is why Israel's State Comptroller has begun to look into the matter.

According to Globes business daily, Noble's oil and gas concessions were given to Noble Energy Mediterranean, which is registered in the Cayman Islands. In his review, the State Comptroller will have to decide whether Noble has asked for an approval for the transfer of the concession to a third party, and then whether the right to transfer was granted by the Energy Ministry.

According to the newspaper, Noble Energy responded by saying that it is operating in Israel according to the law.

The Energy Ministry says that it had never received a request for the transfer of the concession and therefore never approved it.

The comptroller said he will make a preliminary examination of the claims as part of his policy to follow development in the natural gas sector.

Ya'acov Zalel