Critical and unexpected development with one of the world’s largest natural projects the last couple days. With a major court decision putting the future of the development in doubt — in a place that desperately needs supply.
That’s Israel. Where the country’s Supreme Court Sunday dealt a major blow to the advancement of the Leviathan offshore mega-field.
Israel’s government had been working on a development plan for the Leviathan field. Which was discovered six years ago, and eventually found to contain a massive endowment of 20 trillion cubic feet in reserves.
That’s an energy source badly needed in Israel — as well as in neighbouring nations like Jordan, Egypt and Turkey. With Leviathan hailed as a gamechanger for the energy security of this region.
But the development is a serious task. And to get it done, the Israeli government had offered numerous concessions to project owner Noble Energy. Including a 10-year “stability clause” that guaranteed certain aspects of project economics — such as export quotas and taxes.
But Israel’s Supreme Court ruled that such guarantees are beyond the mandate of the sitting government. With the Court saying that today’s officials don’t have the legal right to bind future governments into set fiscal terms.
That’s a major blow to the project. With financial stability being a critical part of developing any mega-project like this. Simply put, no developer wants to splash out billions on a field — only to find its economic projections blown out the window when terms change for key variables like export levels or government take.
Israel’s Prime Minister Benjamin Netanyahu said the decision causes “severe damage” for the Israeli economy. And he could be right — with Noble Energy saying yesterday that the decision raises the risk of delays with development. Which had been planned to be completed by 2019.
The courts gave Noble and the government a year to revise the agreement. But there’s little clarity on what form this might take — with Noble officials saying again this week that investment stability is a “minimum condition for project development.”
Watch for announcements on possible next strategies from both the government and the company in order to move this key project forward.
