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    Israel Minister Seeks Stability Solution

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Summary

The Israeli Energy minister expects solution to the stability clause and sees Egypt and Turkey as lucrative markets

by: Ya'acov Zalel

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Israel Minister Seeks Stability Solution

Israel hopes that the upstream sector will agree a solution to the natural gas framework law's stability clause in the next few months, according to energy minister, Yuval Steinitz, in an interview with Bloomberg.

"I think we are very close and I think if both sides show some flexibility here, we can move forward,” Steinitz was quoted as saying. Steinitz has not supplied any details on the alternative solution to the stability clause which was struck down by the Israeli High Court of Justice at the end of March but hinted that the proposals will be submitted to the gas monopoly partners.

Following the court's ruling, Steinitz said that the government would have to yield to the gas monopoly, led by the American E&P company Noble Energy and Israel's Delek Group. He hinted that the government would have to give financial guarantees in order to secure the development of Leviathan and that would cost the state more.

Steinitz was hopeful that Noble and Delek would move forward with the development of Leviathan despite the sharp drop in energy prices, because natural gas prices in the region remained high. "The prices they will get in Jordan, Egypt, and hopefully in Turkey… are high,” he was quoted as saying. 

Steinitz said that reconciliation talks with Turkey are likely to be concluded positively in the near future and that will open up the huge Turkish energy market to Israeli gas. "We have bridged 80% to 90% of the gap,” he said. “They need our gas, and we need this market," Steinitz said.

However despite Steinitz not giving a precise timetable, he said that a solution would be reached in "no more than a couple of months." If that would be the case then Noble Energy's final investment decision (FID), which was expected by the end of the year, would be delayed by another few months.

For 2016 Noble has budgeted $100mn for its development operations in Israel. During an analyst call, following Noble's Q1's results,CEO David Stover said he was not sure that Noble would spend all that as the company is seeking to save on capex. "Our position's been, we're not going to spend significant money until we're comfortable we have the predictable regulatory environment that gives us the assurance for the project," Stover said. "And that's – I think we've been very consistent on that message. So what we have in there is still some money that ties to some pre-FID work. How much of that we'll spend this year probably depends on how quickly they find their solution."

This week Noble also announced a divestment of undeveloped oil properties in North America which will be sold for $505mn.

 

Ya'acov Zalel

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