WHEREAS a court ruling in Israel complicating plans to develop that
country’s natural gas fields does impact the development of Cyprus’
Aphrodite prospect, the effect is a lateral one, an energy analyst has
told the
Cyprus Mail.
Israel’s Supreme Court on Sunday issued a ruling barring the
government from giving a 10-year guarantee for no legislative or
taxation changes to Texas-based Noble Energy and their Israeli partners
Delek.
The court decision invalidated the stability clause in a deal reached
last year between Prime Minister Benjamin Netanyahu and the consortium
holding concessions on the massive Leviathan play as well as other gas
fields.
The judges said the government is not in the position to make such a
long-term concession and gave the sides a year to come up with an
alternative arrangement for the government to provide stability
assurances.
Noble called the court’s decision "disappointing” and said it risked
causing a delay in the $5 billion-$6 billion project to develop the 22
trillion-cubic-foot gas field.
Noble and Delek have held off on developing Leviathan until the deal
with the government was approved, but had planned to start production in
2019.
According to Charles Ellinas, the development in Israel does affect Cyprus’ own gas plans, but only tangentially.
"Aphrodite was always linked to the development of Leviathan. Noble’s
top priority is to develop and monetise Leviathan, since it is the
bigger and more important field,” said Ellinas.
"Once Leviathan’s development is assured, then on the back of that
Noble and their partners would be able to develop Aphrodite, because of
the synergies – same companies and so forth.”
Either way, the analyst added, nothing has been happening with Leviathan as no gas markets have been found yet.
Sales to Egypt were never likely to happen due to price
considerations, whereas exporting to Europe seems an even more remote
possibility.
"As things stand, Turkey remains the only credible market for
Leviathan. However, although Turkish-Israeli relations are thawing, they
are not there just yet. And there is also the question of needing to
solve the Cyprus problem before a pipeline can be built from Israel to
Turkey.”
In short, court decision or not, at the moment Noble do not have the
cash to develop Leviathan, so Aphrodite must necessarily also be put on
hold.
"On a PR level, at least Noble can now blame the Israeli government for any delays,” he observed.
Still, the Israeli court’s decision does not necessarily stymie Leviathan’s development.
"The court threw out the stability clause of the deal between the
Israeli government and the energy companies, on the grounds it was
unconstitutional,” explained Ellinas.
"But the rest of the deal is intact, and it’s up to the government to tweak it in order to make it work.”
Indeed, as reported by the Oil & Gas Year website, Delek Group on
Monday sounded upbeat that development of the Leviathan gas field could
still proceed on schedule.
Yossi Abu, the chief executive of Delek subsidiaries Delek Drilling
and Avner Oil, was quoted as saying the group would "act so that the
timetable won’t be hurt.”
Discovered in 2010, the Leviathan field is estimated to hold natural gas reserves of around 21.9 trillion cubic feet (tcf)
Cyprus’ Aphrodite field is estimated to hold 4.5
tcf.
(cyprus-mail.com)