Israel seeks bigger share of gas profits

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The Israeli government is poised to raise sharply its cut of the expected profits, likely to run into billions of dollars, from a spate of offshore discoveries of natural gas.

A state-appointed committee on Monday recommended lifting the overall “government take” from the current 30 per cent of net profits to 52-62 per cent. This would leave Israel with a smaller share of oil and gas profits than is taken by Norway and the Netherlands but a higher cut than demanded by the US and Britain.

Yuval Steinitz, the Israeli finance minister, said he was convinced the new regime would “encourage energy corporations to proceed with their activities – not just to produce but also to explore”.

Israel has emerged as a source of potentially huge hydrocarbon riches, after the discovery of several large gasfields in the waters off the northern coast.

A consortium of US and Israeli energy companies last week said the biggest discovery to date, the Leviathan field, contained about 16,000bn cubic feet of gas. This confirmed an estimate issued in June, making Leviathan one of the world’s largest deepwater gas discoveries of the past decade.

The field sits 47km south-west of the second significant discovery in Israeli waters, the Tamar field. Tamar is estimated to contain more than 8,000bn cubic feet of natural gas. Analysts agree that these two fields alone will allow Israel to become a significant exporter of natural gas – potentially transforming the country's economy.

The discoveries, coupled with the government's determination to overhaul laws on profit sharing that date back to the 1950s, sparked furious lobbying.

Israeli and international energy companies were especially angered by the interim findings of the committee, which is headed by Eytan Sheshinski, an economics professor. Tabled in November, they called for an even higher profits levy and other measures that would have raised the government take to 60-66 per cent.

Mr Steinitz denied that the committee had changed its views as a result of corporate lobbying and attacked the gas industry for making “illegitimate” threats, including warning that it would not develop the newly discovered fields.

Noble Energy, a US company, holds the largest stake in both the Tamar and Leviathan fields, with Israeli groups Delek and Avner owning the bulk of the remaining shares.

The companies had argued that the Tamar field, which was discovered two years ago, should be excluded from the new regime. The Sheshinski committee has proposed a transition agreement in which profits from Tamar and similar fields will be subject to a government take of 43-59 per cent, provided they come on stream before 2014.

Profits from Leviathan, however, would be subjected entirely to the new rules. The committee's findings must now be agreed by the government and parliament before coming into force.

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