Israeli Natural Gas

At the beginning of December, Israel was busy trying to convince Brussels to underwrite the creation of a vast network of pipelines to bring new discoveries of Israeli natural gas to Europe. Now, after just a few weeks and an unexpected series of regulatory reversals, Israel is trying to figure out if it will be able to develop the massive natural-gas fields that lay just offshore at all — or if they’ll remain there, tantalizingly out of reach.

Earlier this week, in a surprise move, Israeli antitrust authorities essentially slammed the brakes on the country’s gas development, expressing concern that the handful of companies that are investing billions of dollars in offshore rigs and pipelines to tap the tricky gas fields are just too few. That creates, they say, the specter of a commercial cartel that would have a permanent stranglehold on Israel’s energy future.

In the middle of an election, pocketbook issues like domestic energy prices often come to the fore. And the decision might help protect Israeli consumers, if other companies rushed in to fill the void and start drilling the gas fields on their own, providing more competition for Israel’s energy sector and offering insurance against pricey domestic fuel.

But as it is, with plunging energy prices, a volatile geopolitical environment in the Eastern Mediterranean, terrorism, the never-ending complications from the Israeli-Palestinian conflict, and uncertain export routes for the Israeli gas, global energy players are hardly falling over themselves to take a rider on big investments there. As a result, the anti-trust decision could translate into a significant delay, if not a derailment, of Israel’s plans to become the newest regional energy power broker.

A pair of big companies, Noble Energy of the United States and Delek Energy of Israel, are spearheading the development of the country’s two biggest finds, Tamar and Leviathan. That latter field, in particular, is the linchpin of Israel’s hopes to have plentiful gas at home and enough to earn billions shipping it to neighbors. Tamar, with about 11 trillion cubic feet, can meet Israel’s own needs for decades and provide gas feedstock for Egypt. Leviathan, twice as large, could fuel a regional export business: A recent deal with Jordan, for example, could be worth as much as $15 billion if it secures approval from both governments.

Together, the consortium controls about 90 percent of Israeli gas. In order to assuage competition concerns, the consortium had agreed earlier this year to unload ownership in a pair of smaller gas fields, with the understanding that would be enough to win a regulatory green light for continued work on the big fields.

But Israel competition officials got spooked. On Tuesday, they said that such concentration would essentially create an illegal cartel. The proposed remedy will likely be presented early next year, but would probably include a demand to hive off Leviathan and sell it to a different consortium, pushing back development of that field for years at the very least.

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