Israel's Supreme Court Suspends Offshore Deal

offshore

By MarEx 2016-03-28 10:50:26

Israel’s Supreme Court has called a deal to develop the nation’s offshore gas reserves unconstitutional. On Sunday, the court suspended the deal for a year, a major setback for supporter Prime Minister Benjamin Netanyahu.

At the center of the controversy is a clause that gave energy companies pricing and regulatory stability for 10 years regardless of potential changes in government. U.S.-based Noble Energy and its Israeli partner Delek Group had argued that the stability clause was required for them to invest in the development.

Netanyahu’s government will now be required to amend the clause. 

The deal has already been delayed by other regulatory hurdles, and it garnered disapproval as anti-competitive in 2014. 

Noble is the only international company operating in Israel, after Woodside Petroleum pulled out of negotiations in 2014.

Israel’s Mediterranean fields include the Tamar and Leviathan gas fields. The Leviathan field, the largest, is estimated to contain over 22 trillion cubic feet of gas. The Tamar field is estimated to contain about half of that.

“The Supreme Court’s resolution severely threatens the development of Israel’s gas reserves. Israel is seen as a country with exaggerated legal interference that makes doing business hard,” Netanyahu said on his official Twitter account. 

David L. Stover, Noble Energy's Chairman, President, and CEO, commented, "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. 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.

“Noble Energy has consistently maintained that stability is a minimum condition for project development, and our position has not changed. As we have stated before, we will vigorously defend our rights related to our assets to protect shareholder value. 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."

The Leviathan partners said in a statement that they would work with the government “to swiftly create conditions for stability” that will allow the field to be developed by the end of 2019, in line with the current timetable.