Jordan defers talks on $15-bn gas deal with Israel
06 January 2015
Jordan has suspended negotiations with a consortium led by US energy major Noble Energy Inc for the import of $15-billion worth of natural gas from Israel, as disagreements between the oil companies and Israeli authorities continue over monopoly issues.
Noble Energy and its partners Israel's Delek Group and Ratio Oil Exploration are developing the country's biggest natural gas field Leviathan in the Mediterranean Sea, about 130 km off the coast of Israel.
Leviathan and the adjacent Tamar gas fields are the biggest natural gas discoveries in the last decade, together holding an estimated 29 trillion cubic feet of gas and is expected to provide Israel with greater energy independence.
Production from Leviathan was expected to begin in 2018 on an investment of approximately $6.5 billion.
''We were informed that there are differences between Israel and Noble Energy and we cannot proceed with talks until we know which side will develop the gas field in Israel,'' Jamal Gamouh, the head of Jordan's energy committee said in an interview with Bloomberg.
Jordan, the Middle East's smallest economy after Bahrain, meets all its energy needs through imports. The country which has a peace agreement with Israel is looking for a secured energy source after regular disruptions in its gas supplies from Egypt due to pipeline bombings in Sinai.
A preliminary $15-billion deal was signed in September between Jordan and the gas consortium to supply 1.6 trillion cubic feet of natural gas to Jordan's National Electric Power Co over 15 years. Noble had also signed a $771-million deal last year to supply Jordan's Arab Potash Co beginning 2016.
The Jordanian move follows Israel's recent decision to prevent a gas monopoly in Israel. Israel's anti-trust authorities are reconsidering an earlier decision letting the consortium to develop the country's two biggest gas fields.
Noble Energy owns 39.66 per cent of Leviathan while Delek Group holds 45.34 per cent-per cent interest through its units Delek Drilling and Avner Oil Exploration. The remaining 15 per cent is owned by Ratio Oil Exploration.
Israel's competition commissioner David Gilo said a fortnight ago that Noble and Delek's ownerships constituted a cartel and recommended breaking up of the control of the country's gas resources.
According to some analysts, the proposed action by the regulator could send a negative message for investors in Israel and could significantly affect the development of the Leviathan field.
The Israeli authority plans a hearing scheduled at the end of the month with the companies before taking a final decision. However, Noble and Delek could be forced to sell their interests in Tamar or Leviathan.
Meanwhile, the US is pushing for implementation of the gas deals with Egypt and Jordan saying that it should foster a new level of cooperation in the region.
In an interview with Globes, Amos Hochstein, the US special envoy for international energy affairs said, ''We'll support any agreement that will satisfy both parties, the Israeli regulators and the companies, and facilitates developing the gas fields as rapidly as possible. I believe this is also in Israel's interest.''
''We believe that the gas discoveries in Israel should be an opportunity for fostering a new level of cooperation between the countries in the region: Jordan, Egypt, the Palestinian Authority, Turkey, and Cyprus. It can be an opportunity for bolstering security and enhancing prosperity for all those operating in these areas, Hochstein said.
It has been reported that Jordan may sign an agreement with Britain's BG Group Plc to buy gas from offshore Gaza Strip fields, according to the country's minister of energy and mineral resource Mohammed Hamed.
The Leviathan consortium is in talks with BG Group to supply 105 billion cubic metres of natural gas over a period of 15 years which is worth approximately $30 billion. BG Group plans to transport the gas through a pipeline to its gas liquefaction facility on the Egyptian coast for further export.