Delek and Noble Divest Two Offshore Gas Fields

Israeli energy company Delek Group announced Wednesday that it will sell its interests in two small offshore natural gas fields to Cypriot firm Energean, reducing the monopolistic structure of Israel's offshore sector. 

Energean's $150 million bid is still subject to approval by the Petroleum Commissioner, in consultation with antitrust authorities.

The sale of the two fields, named Tanin and Kanish, is part of Israel's Gas Framework agreement for development and diversification of its offshore industry. Presently the main oil and gas firms operating in Israeli waters are Delek and its partner Noble Energy, the primary investors in the larger Tamar and Leviathan fields. Israel's courts have objected to the absence of competition in the sector. 

Last year, the government reached an agreement allowing the development of the Leviathan offshore gas field to move forward; as a precondition, it requires Noble and Delek to reduce their stakes in Tamar and to sell their interests in Tanin and Karish. 

The courts objected to the arrangement in March on other grounds, ruling that the government's guarantees on pricing and regulation were unconstitutional. Noble and Delek had received a contractual assurance of ten years of price and regulatory stability, which Noble described as a "minimum condition for project development." The government swiftly altered the clause to meet the court's requirements, allowing Delek and Noble to move forward.

Among other provisions, the amended agreement permits export of a certain quantity of gas to other nations; industry insiders suggest that if Israel and Turkey build a subsea export pipeline, up to 10 billion cubic meters per year could flow to Turkey and onwards to European markets. However, the pipeline would pass within waters claimed by Cyprus, which has objected strongly to the proposal: the island nation has been split between Greece and Turkey since 1974, and the Greek-Cypriot government views the project as a form of economic assistance to an occupying force.

The deal with Energean follows an announcement in late July that Delek and Noble intend to bid for new natural gas exploration licenses in the Aphrodite field offshore Cyprus. Delek and Noble abandoned an existing license near the bid area several months ago when the rights expired.