Israel Offers ENI Karish and Tanin Gas Fields


Claudio Descalzi, CEO of Eni, met Thursday with Israel Prime Minister Benjamin Netanyahu following on an earlier with Israel Minister of Energy Yuval Steinitz. Mr. Descalzi arrived in Israel in order to promote cooperation on natural gas export between Israel, Egypt and Cyprus following an intervention from the Italian Prime Minister, Matteo Renzi. “In the increasing strategic cooperation between Israel and Italy in a variety of fields, I see huge importance to cooperation with Italy also in the energy sector,” Mr. Netanyahu said after the meeting.

The Eni chief is trying to promote is export of gas from Tamar field through Union Fenosa Gas’s LNG facility in Damietta, Egypt. At the end of August, ENI announced a 30 TCF reservoir discovery in Zohr license off shore Egypt. That discovery caught Israeli policy makers and regulators off guard and is now threatening to derail the development of Israeli gas assets and stall the export options. Already it seems that the option of exporting Israeli gas for Egyptian local market was taken off the table and the only export options remain viable are through LNG facilities in Egypt. In order to promote the ENI deal the Israeli government will have to backtrack on an earlier resolution that required the development of Leviathan field and connect it to the Israeli mainland, before allowing export from Tamar, currently the only source of natural gas to the Israeli customers.

During Mr. Descalzi’s meeting with Mr. Steinitz he was offered to invest in two small off shore Israeli reservoirs on the border to Lebanon, Karish (50 bcm) and Tanin (20bcm). These reservoirs may well extend into the Lebanese Exclusive Economic Zone. Currently those two undeveloped reservoirs are owned by a deemed natural gas monopoly controlled by Noble Energy and Delek Group. However according to the regulatory framework to the Israeli natural gas industry, which is yet to be approved, the monopoly will have to sell those two assets within 14 months of the approval. In case the reservoirs will not be sold, they will be returned to the state who will sell them to the highest bidder.

Mr. Seintiz’s offer to ENI is intended to create competition in the Israeli local natural gas market. However developing those two small assets will be costly and therefore their contribution towards competition is dubious. If it does come to pass, it will may impact the natural gas price in Israel with high levels for years to come.