FT: Regulatory risk fears halt Israel offshore gas drills

Exploration of Israel’s large offshore natural gas reserves, touted as a once-in-a-lifetime opportunity for the country and a geopolitical game-changer for the Middle East, has ground to a halt because of investors’ concerns over regulatory risk.

Drilling ships have stopped the search for new gasfields under the eastern Mediterranean off Israel, where 1,000bn cubic metres of proven reserves lie, and about 1,500bcm more are still to be found. The reason for the hiatus, according to the industry, is the increasingly hostile regulatory environment, including a rule that about half the output should be reserved for the domestic market, although analysts say the recent softening in gas prices has played a contributory role.

The $6.5bn Leviathan offshore project, on which Israel’s Delek Drilling and Noble Energy of the US want to begin work next year, with gas in production by 2017, continues to inch forward. However, industry investors warn this could be the last significant gas project off Israel’s shores for some time.
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