Israel will soon submit to Noble Energy Inc. and Delek Group Ltd. a proposal meant to unblock stalled development of the Leviathan natural gas field and allow exports to Egypt and Turkey, Energy Minister Yuval Steinitz said.
The proposal would be a “softer” version of the government’s offer to promise the energy explorers regulatory stability for 10 years, which Israel’s highest court struck down in March, Steinitz said Wednesday in an interview in his Jerusalem office.
“We are seeking to reach a solution soon, in a matter of weeks, no more than a couple of months,” he said. “I think we are very close and I think if both sides show some flexibility here, we can move forward.” He declined to go into details.
The absence of a regulatory framework has held up the development of Leviathan, Israel’s largest gas reserve, discovered in 2010, and hindered production at the smaller Tamar field. It also has blocked export deals and antagonized investors, making it harder for Texas-based Noble and units of Israel’s Delek to secure financing at a time when energy prices have tumbled.
Delek Group gained 1.3 percent at 4:55 p.m. in Tel Aviv. A company spokeswoman didn’t immediately return a request for comment and a Noble spokeswoman declined to comment on government discussions.
Steinitz is leading a team of government officials trying to work around the court’s objection to the so-called stability clause, which it said exceeded the government’s authority. The government proposal that’s shaping up would provide Noble and Delek with some measure of stability, but not as much as the original commitment, Steinitz indicated.
"We will probably see some kind of softer stability commitment, but still significant," he said. "I want to give them something which is softer but still substantial, which according to our experts has a reasonable chance not to be rejected by the court once again."
Last month, Steinitz said the gas explorers may end up with a better deal as the government weighed incentives -- including debt guarantees and financial compensation -- for any damages resulting from regulatory changes. Asked on Wednesday whether those options were still on the table, he said he didn’t want to go into specifics.
Government legal advisers think such offers would be struck down by the court, according to a Finance Ministry official who wasn’t authorized to comment on record and spoke on condition of anonymity.
Although the drop in crude oil prices has cut into global spending on oil and gas projects, Israel is betting Noble and Delek will move forward with Leviathan because gas prices in Israel and elsewhere in the region remain relatively high, Steinitz said. A possible breakthrough in Israel’s reconciliation talks with Turkey may also open up a large export market, he added.
"The prices they will get in Jordan, Egypt, and hopefully in Turkey -- because we are very close to resuming a diplomatic relationship with Turkey -- are high," he said.
"Turkey is a huge market for gas," with forecasts predicting consumption there will almost double in seven years, he said.
While Israel and Turkey remain divided over a few issues, they are likely to reach a deal soon, said Steinitz, who is close to Prime Minister Benjamin Netanyahu, whose office is leading the talks. He declined to elaborate, but noted signs of progress toward rapprochement: Turkey didn’t object to Israel opening an office at the headquarters of the North Atlantic Treaty Organization, and Steinitz himself recently met with Erdogan, according to domestic and foreign news reports.
"We have bridged 80 to 90 percent of the gaps," he said. "They need our gas, and we need this market. I think we will reach a resolution with Turkey in weeks -- but even if it takes months, gas projects take years."