"Taking Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc. (NYSE: NBL) out of Leviathan is the best solution in the short term," Antitrust Authority director general David Gilo told the Knesset Economics Affairs Committee today. "When I took up this job, we initiated a step on the basis of the fact that when they acquired Leviathan, they did not ask for permission from the Antitrust Authority. If we hadn’t initiated this step, competition would probably never develop in the natural gas market."
Economics Committee chairman MK Avishay Braverman (Labor) convened the meeting to ask Gilo for details of the pending agreement between the Antitrust Authority and Delek and Noble Energy.
"I would prefer for Delek and Noble Energy to leave Leviathan, after which competition would develop, but I lack the authority to physically remove them from Leviathan, but only to announce that there has been an offense and then only the court could issue an order to physically remove them from Leviathan. This would be followed by a long legal case," continued Gilo.
"We therefore chose the solution of creating competition in the short with 70 billion cubic meters (BCM). We want to create a player that will compete at terms that are as good as possible against Delek, Noble Energy, and other partnerships. This amount is three times the quantity at the Yam Tethys field, which met Israel's gas needs for years."
Gilo said, "I don’t have the authority to break things up. That solution can only be achieved by legislation. I only wish to emphasize that legislation of this kind can be carried out instead of the process we're now managing, and it is possible to consider supplementary legislation.
"We have three alternatives. In terms of competition, there is no doubt that the best alternative is to create competition between Tamar and Leviathan, but, as I said, we lack the authority to do so, and it can only be done by legislation. The second alternative is to bring in another player, which will compete with 70 BCM and the possibility of discovering an additional 27 BCM. Such a player could supply half of the market for 16 years, and is our preferred solution. The third alternative is a court battle to remove Delek and Noble Energy from Leviathan, after which the new player would compete against the Tamar partnership.
"We prefer the second alternative, because we calculate that until we could remove Delek and Noble Energy from Leviathan, Tarmar would already have sold most of its gas to customers and would have just 53 BCM left. The long-term result would be competition between a large field owned by the successor of Delek and Noble Energy in Leviathan and a group of small fields."
Published by Globes [online], Israel business news - www.globes-online.com - on January 30, 2014
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