For five years, a giant natural gas field called Leviathan has been touted as a way for Israel to join the leagues of petro-exporters, obtaining energy security and a much-needed flow of dollars. But a court decision has again postponed drilling, probably holding back big Israeli natural gas exports into the 2020s.
In the March 27 decision, Israel’s supreme court struck down part of the deal with two companies to develop Leviathan. It ruled that prime minister Binyamin Netanyahu had unconstitutionally frozen regulatory and tax changes for a decade. Netanyahu has criticized the ruling and said he will find a way around it.
But the move reflects a trend that is hobbling natural gas, just as the world attempts to move electricity production away from coal, which is more polluting. In Australia, Tanzania and now Israel, regulators, judges and companies are putting natural gas plans on hold because of low prices, high costs, and doubts about the fairness of deals signed long ago.
On March 22, Woodside Petroleum canceled a $40 billion liquefied natural gas (LNG) project offshore from Australia because gas prices have plunged by 78% in Asia, making it hard to justify the development cost.
Meanwhile, Tanzania and Mozambique—the sites of the largest gas finds in recent years—have been slow to clear the bureaucratic hurdles that would allow Shell, Eni, Anadarko, and other majors to push ahead with LNG development there. In Tanzania, natural gas exports may begin in 2024 at the earliest.
In Israel, Leviathan has met political and public allegations that its developers—Houston’s Noble Energy and Israel’s Delek Group—got a sweetheart deal and that households will pay the price in the form of higher electricity bills. But Netanyahu has pushed back, arguing that Leviathan has a national-security benefit for Israel, giving it breathing room in a hostile neighborhood.
In a note today to clients, Deutsche Bank’s Ryan Todd said he expects the Israeli government to find a compromise that allows drilling to proceed. In a statement, Noble and Delek urged Israel to resolve the problem “quickly.” Among the companies’ options is to walk away from Leviathan entirely, although that seems improbable.
Robin Mills, a Dubai-based consultant with Qamar Energy, said that if Noble and Delek do walk away, Israel will have trouble finding other companies to develop the field. “No major company will touch it” because of Israel’s erratic natural-gas politics, he told Quartz.