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Israel's Supreme Court's Hearing on Gas Exports Postponed

A key hearing on gas exports is currently in front of the Israeli High Court of Justice. The cabinet’s decision to export around 40% of the newly found gas and preserve 60% of the gas at home was taken earlier on 23 June this year. The decision dictates that sales to Israel’s immediate neighbours, Jordan and the Palestinian authority would come out of the allocation for exports. The decision attempted to find a compromise between on one hand the recommendation of the Tzemach committee to export half of the gas and on the other hand the concerns of the public and some of the political organizations to ensure Israel had enough gas to become and remain energy self-sufficient for years and years to come. The conservative approach reflected Israel’s long history of energy dependence, relying mainly on Egypt for natural gas supplies and suffering from numerous disruptions due to attacks on the pipeline connecting to the countries.

Between keeping all the gas at home and exporting a large proportion, a balance had to be found. Oil and gas companies involved in the development of Israel’s hydrocarbon wealth need an incentive to continue their search for gas and transform the country into an energy producer. Sales revenues would ensure such a motivation is maintained and would constitute a serious motivation for oil and gas explorations to go on. New revenues in billions would also substantially boost the country’s economy by improving the employment market, allowing the realisation of national projects of all kinds and constituting a hedge against balance of payment fluctuations.

Members of the Parliament and various political groups were still not satisfied with the decision and contested its legitimacy before the Supreme court of Justice. They argued that the importance and weight of the stakes involved should require the involvement of the knesset. The hearing on the petition, originally scheduled for 17 September, was postponed to 20 October. A seven-member panel will be hearing the case including Supreme Court President Asher Grunis.  

The uncertainty around the outcome of the hearing frustrates investors and in particular the Australian giant Woodside that signed last December a memorandum of understanding with Noble, Delek, Avner Oil and Gas and Ratio Oil Exploration to acquire a 30% stake in the Leviathan licenses for USD 1.25 billion. The deal had been due to close in February but was delayed on several occasions, initially pending a government decision on gas exports, and then by the Supreme Court's consideration of appeals against it.

Despite such delays, Israel is still a step ahead compared to its neighbours. Cyprus is in the process of confirming the quantities of gas believed to be found in the Aphrodite field in the Island’s Block 12. Results of the appraisal drilling are expected in a couple of weeks. The island is also building the pillars of its LNG facility in Vassilikos that would allow it to export natural gas from Aphrodite and other potential fields within its EEZ. Cyprus also hopes to realise its ambition of becoming an energy hub by attracting gas from neighboring Israel and Lebanon for processing and transiting. Lebanon, still without a fully functional cabinet, is struggling to launch its exploration phase. Despite significant interest in its resources expressed by international oil and gas companies through their high level of participation in the pre-qualification round, the country is going through episodes of instability as a result of the civil uproar next-door in Syria.

Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.  Follow Karen on Twitter: @karenayat