An aerial of the Tamar Lease natural gas rig, in northern Israel.
Photograph by AP
By Reuters
March 27, 2016

 

Israel’s Supreme Court blocked a controversial plan to develop the country’s natural gas fields on Sunday, dealing a blow to energy companies operating in the eastern Mediterranean and drawing fire from the government.

Prime Minister Benjamin Netanyahu reached a deal last year with Texas-based Noble Energy and Israel’s Delek Group that would leave them in control of the country’s largest gas field, Leviathan, while forcing them to sell smaller, yet sizable, assets.

The agreement also provided an outline for the next decade, with the government committing to leave taxes, export quotas and other regulation unchanged, and the companies agreeing to develop Leviathan at an accelerated pace.

The court, however, said the government was not in a position to make such long-term commitments on regulations and blocked the plan on those grounds.

That commitment “that binds the government to the outline, including no changes in legislation and opposing legislative initiatives for 10 years – cannot stand,” the court said in its ruling.

It gave the government a year to come up with an alternative arrangement or the outline will be canceled.

“The (court) decision’s negative consequences on the development of the gas market, on energy security, on the Israeli economy and on the lost revenue for the state of Israel and its citizens, could be very tough, and even irreversible,” said Energy Minister Yuval Steinitz.

Noble and Delek have held off on developing Leviathan until the deal with the government was approved, but had planned to start production in 2019.

The deal reached by the government would have also encouraged new energy companies who have been waiting for regulatory uncertainty to clear up before investing in exploration.

However, it also drew a lot of opposition including from public advocacy groups and opposition lawmakers, who said it would still have left Noble and Delek in control of too much of Israel’s gas.

Steinitz said he still hoped the government would find a way to encourage development of the offshore gas fields, and would explore its options in the coming days.

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