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Regulator targets Israeli gas monopoly, investors warn of economic impact
In a dramatic announcement yesterday, Israel’s Antitrust Regulator, David Gilo said that he recommends ending the dominance of two principle investors in Israel’s natural gas development.
The Leviathan and Tamar natural gas fields are thought to contain around 800 billion cubic metres in gas, enough to supply the Israeli market for a century. Israeli company Delek Drilling and American firm Noble Energy hold controlling stakes in both fields and have been largely responsible for their development so far. Deals have already been agreed to supply significant quantities of gas to Jordan, to Britain’s BG group in Egypt and agreements with Turkey and Cyprus are also thought to be in the works.
However, Gilo yesterday recommended breaking up what he considers a Delek-Noble monopoly, announcing “The entry of Delek and Noble into Leviathan has created a situation in which these groups control all the gas reserves on the coast of the state of Israel.” It is unclear how such a recommendation would be enforced. Noble and Delek could be asked to sell part of their shares. Meanwhile, Prime Minister Benjamin Netanyahu has referred the issue to the Director of the National Economic Council. However, Gilo’s decision is likely to be challenged in the courts, amounting to a significant delay in Israel’s gas development.
Gilo said he was aware that his “determination could have consequences for the economy.” A statement by Noble said that the decision “cast a shadow over the future of the oil and gas industry in Israel and will impact Noble Energy’s continued investment there.”
There are significant Israeli public concerns over the impact of monopolies on the consumer. However, some business commentators have expressed concern over the impact of yesterday’s decision not only on the Israeli energy industry but on wider investment in the country, due to concerns of over-regulation. Yediot Ahronot’s economics commentator Sever Plocker said that Gilo’s announcement could have “far-reaching and profound repercussions for the Israeli economy and Israeli society.”