Eric Watkins
Oil Diplomacy Editor
Government officials in Tel Aviv are apparently reconsidering their position concerning new natural gas discoveries off Israel following an alleged attack on a major gas pipeline in Egypt's northern Sinai Desert.
Egyptian state media and local government officials said they suspected sabotage in the pipeline explosion at a gas terminal in Egypt's northern Sinai Peninsula that temporarily shut down flow.
The incident has Tel Aviv worried as Egypt supplies about 40% of Israel's natural gas. Not least, the gas deal is a cornerstone of peaceful relations between the two countries.
But Israel fears Egyptian instability could render the agreement worthless, a point underlined by Israel's National Infrastructures Minister Uzi Landau.
"We always hope for the good, in terms of the peace agreement that we have and with the gas commercial contract that we have, but we always have to prepare ourselves for the bad case," Landau said.
Tax exemption...
In fact, immediately after the explosion, Landau called for the government to exempt developers of new Israeli gas fields-including Houston-based Noble Energy Inc.-from proposed new taxes. His aim, of course, is to speed up development of the offshore deposits that were discovered by Noble and its partners. More to the point, Landau said that Israel must become energy independent.
Chances are that the country will indeed become energy independent in due course, given the amount of gas reported to be under Israel's portion of the Mediterranean Sea.
Just last month, Noble reported an apparently major gas find with the Leviathan prospect it operates off Israel.
"This discovery has the potential to position Israel as a natural gas exporting nation," said Nobel Pres. and Chief Operating Officer David L. Stover.
...welcomed by firms
Altogether, Noble and its partners made three gas discoveries in the Levantine basin amounting to 25 tcf, according to Charles D. Davidson, the firm's chairman and chief executive officer. Landau's call for the government to exempt developers of new Israeli gas fields from proposed taxes will certainly be welcomed by the firms that intend to develop the offshore deposits.
It was just late last month that Israel's Cabinet approved a sharp increase in taxes on profits from its recently discovered gas reserves, despite opposition from Noble and its Israeli partners. The plan drafted by a Finance Ministry committee would roughly double current tax rates to collect 52-62% of revenues from gas and oil finds.
Now, it seems, a terrorist bomb in Egypt suddenly has the Israeli government thinking otherwise. Now, it seems, gaining energy independence counts for more than a few extra shekels in the state treasury.
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