Italian natural gas drilling operator Edison is suspending its operations in Israel, company sources confirmed today to the press. Edison will be willing to resume operations in Israel if the gas industry structure is put in order within a few months.
Before Antitrust Authority director general Prof. David Gilo decided to liquidate the Leviathan partnership, Edison was a candidate to buy the Karish and Tanin reservoirs. Edison is also the operator for the Neta and Royee reservoirs. Former Ministry of Finance director general Yarom Ariav represents Edison in Israel.
Edison, a subsidiary of EDF, France’s national energy corporation, is considered a drilling operator in the same class as Noble Energy, which currently operates the Tamar reservoir, and is also expected to operate Leviathan. In April 2013, Ministry of National Infrastructure, Energy, and Water Resources Petroleum Commissioner Alexander Varshavsky granted the Neta and Royee licenses to Ratio Oil Exploration (1992) and Edison. Ratio currently holds 70% of the license rights, Edison 20%, and Israel Opportunity Energy Resources 10%.
In 10 days, the license partners must report to the Ministry of National Infrastructure, Energy, and Water Resources where they wish to conduct drilling, with the first drilling scheduled to take place by the end of 2015. In addition to its holding in the licenses, Edison intended to bid for the purchase of the Karish and Tanin reservoirs from Noble Energy and Delek Group Ltd. These reservoirs contain 80 BCM of gas.
Gilo previously ruled that the sale of the two reservoirs to a third party was a condition for obtaining an exemption from the ban on an agreement in restraint of trade for the partnerships’ holdings in the Leviathan reservoir. In December 2014, however, Gilo retracted the consent decree on which he had agreed with the Leviathan partners, claiming that the agreement would not facilitate real competition in the gas sector.
Gilo’s decision aroused a storm in the sector, and anger and confusion at the Italian company, which had hitherto kept a low profile. The decision to dissolve the Leviathan partnership obviously affects the sale of Karish and Tanin, but it also affects the other reservoirs and licenses. For example, under a June 2013 cabinet resolution, the Petroleum Commissioner is entitled to authorize a partnership in any reservoir to export gas only if it will provide the local economy with 540 BCM in available gas.
If development of the Leviathan reservoir is suspended or delayed and the supply of gas to the local economy is insufficient, the future gas reserves will therefore be unable to export the gas. The ban on exports is a significant constraint, especially for small gas reservoirs that can export up to 75% of the reservoir’s contents. Edison is willing to wait a few more months in order to give the Israeli gas sector a last chance. If no regulatory certainty in the sector is achieved in this period, however, Edison will abandon its activity in favor of countries where it believes certainty is greater.
Last month, the company reported that it had decided to exercise its option to buy a license for drilling in the North Sea, and also acquired licenses in Egypt. Since Gilo made his decision, representatives of the Ministries of Finance and National Infrastructure, Energy, and Water Resources and the Antitrust Authority have been meeting in order to find a compromise acceptable to all of them. The parties are trying to find a way to facilitate competition in the energy sector on the one hand and rapid development of the Leviathan reservoir and the supply of gas from it to the local economy on the other.
Source: Cyprus Gas News