"It is embarrassing to see how the Israeli government is allowing Delek Group Ltd. (TASE: DLEKG) and Noble Energy to humiliate it, after having nurtured them and allowed them to take control of both the local and regional natural gas markets," Ohad Schwartz, a director at Nammax Oil & Gas, controlled by Beny Steinmetz, wrote to Ministry of National Infrastructure, Energy, and Water Resources director general Ehud Adiri. Schwartz represents the Israeli companies that are partners in the Yishai prospect and are claiming rights in the Aphrodite natural gas reservoir, most of which is in Cypriot territorial waters. Nammax was a partner in the Aphrodite 2 gas drilling, in which the reservoir was discovered by Noble Energy in 2011. The reservoir also extends into Israeli economic waters.
Three years after the Aphrodite discovery, the discovery drilling was announced and the Ishai license was given the status of a prospect. For years, Israel demanded that Cyprus come to an agreement with it on distribution of the gas in Aphrodite. "We get no pleasure from criticizing the Israeli government," Schwartz added. "This is not at all the purpose of this message. This message is another attempt to clear up the ambiguity and break through the prolonged deadlock in the negotiations with Cyprus that is working against all of our interests."
The appeal followed an announcement by Delek Group last Thursday of the signing of an agreement between Delek Group and Noble Energy, the partners in the Aphrodite reservoir, and the Cypriot government revising the franchise agreement between the parties. "An examination of the detailed announcement indicates that there is no reference to the rights of Israel and the Ishai prospect in the reservoir, even though Delek explicitly states in its annual financial statements that part of the Aphrodite reservoir lies in the Israeli Ishai prospect," Schwartz wrote.
Schwartz added, "This development is a significant milestone towards commercialization of the reservoir, following a series of other milestones last year, such as the signing of an agreement between Cyprus and Egypt for laying an undersea pipeline from the reservoir to the Egyptian shore and the advanced negotiations between the partners in Block 12 and Royal Shell for the sale of gas from the reservoir to the company's liquefaction facility on the Egyptian shore. We once again see that the Cypriot government and the Aphrodite partners are taking another step towards development of the reservoir, while openly and contemptuously ignoring the rights of Israel and the Yishai prospect in the reservoir. The negotiations between Israel and Cyprus on Israel's shares of the reservoir have dragged on for years, but in practice, Cyprus and the Aphrodite partners are going ahead unilaterally with development of the reservoir, without coordination with Israel.
"The latest development in Cyprus is further proof that the time has come to recognize the fact that Cyprus and the Aphrodite partners are not waiting for Israel; they are pressing on towards commercialization of the reservoir, which in the pessimistic scenario will mean completion expropriation of Israel's right, and in the optimistic scenario will offer Israel a few humiliating crumbs. Each of these scenarios involves a loss of billions of shekels that will flow into the Cypriot treasury and to the Aphrodite partners, Delek Group and Noble Energy, instead of into Israel's treasury.
"The Ministry of National Resources, Energy, and Water Resources has explicitly and justifiably declared a number of times, both to us and in the media, that Israel will not abandon its rights in the reservoir. On the other hand, the policy pursued in the negotiations with Cyprus is inconsistent with the ministry's statements. As long as the conciliatory policy with the Cypriot government continues, it will eventually culminate with the Israeli government's total loss of its rights in the reservoir, amounting to billions of shekels for the state treasury from the exercise of these rights. The Ministry of National Infrastructure, Energy, and Water Resources should rethink its strategy in the negotiations with Cyprus, because six years of deadlock in the negotiations have proven the failure of this strategy. The ministry should revamp its tone and attitude, and leave Cyprus, Delek Group, and Noble Energy no choice but to recognize our rights, the sooner the better, and no later than before development of the reservoir begins."
Published by Globes, Israel business news - en.globes.co.il - on November 11, 2019
© Copyright of Globes Publisher Itonut (1983) Ltd. 2019