Noble Energy CEO Urges Israel to Adopt New Natural-Gas Policy

The chief executive officer of Noble Energy Inc., the Houston-based energy firm that has made large gas discoveries off Israel's coast, warned Israel on Thursday that its policies could jeopardize future investments in oil and gas exploration.

Noble CEO Charles Davidson is in Israel to mark the start of production on the Tamar field, discovered in 2009 and to press the government to adopt new export legislation.

Mr. Davidson said Noble would not start production on its even larger Leviathan field until Israel laid down export rules dictating how much gas Noble would be allowed to sell abroad. Leviathan, discovered by Noble in 2010, was the world's biggest deepwater gas find in a decade. It is estimated to contain 18 trillion cubic feet of gas, enough gas to supply Israel's needs for more than 100 years.

The Tamar field, which began pumping gas on March 31, holds an estimated 10 trillion cubic feet.

"We need to commit to develop Leviathan this year but we can't do it without an export policy," said Mr. Davidson.

Mr. Davidson said he relayed that message to Israeli Prime Minister Benjamin Netanyahu during a face-to-face meeting on Wednesday.

"I encouraged him to move as quickly as possible," Mr. Davidson said. Mr. Netanyahu's office confirmed the meeting took place but declined to comment on what was discussed.

A 2012 government commission issued recommendations that the government has yet to adopt. The issue has stalled in part because of elections earlier this year and a protracted political negotiation to form a new government.

There has also been some opposition to the recommendations from environmentalists and opposition Labor Party leader Shelly Yacimovich.

The new finance minister, Yair Lapid, raised eyebrows on Wednesday when he called for Israel to re-evaluate how it taxes natural resources. A spokeswoman for Mr. Lapid said on Thursday oil and gas policies would not be included in that review.

Mr. Davidson said that any reduction in the export quota from those laid out by the government committee's recommendations in 2012 could make it economically unviable to move ahead on Leviathan.

"If there is any discussion of reducing that, it very quickly puts at risk having the critical mass for export," said Mr. Davidson.

The delay in approving export guidelines has held up finalizing a deal with Woodside Petroleum Ltd. (WPL.AU WOPEY), the Australian oil and gas producer, which is expected to buy a 30% stake in Leviathan for $2.3 billion, Mr. Davidson said.

After decades of mostly fruitless searches for oil and gas in Israel, the spate of gas finds off Israel's coast beginning with the discovery of Tamar in 2009, came as a surprise to Israel's government.

As government officials scrambled to bring government regulations in line with the country's new energy riches, government decisions often rankled oil companies. The decision in 2011 to increase taxes retroactively on oil and gas investments remains a sore point for energy companies such as Noble, which had already invested around $1 billion when the new tax regime was pushed through.

"If the state of Israel did that again it would clearly scare off more investors from exploring in Israel," Mr. Davidson said. "If it were reopened we'd have to reconsider everything we're doing here."

Mr. Davidson said that incident may have already scared off some international oil and gas companies.

"When we went looking for partners in Leviathan, I felt there were some discussions where some companies were a little reluctant because of what happened on taxes in the past," he said.

The gas from Tamar and Leviathan is expected to save the Israeli government about $250 million a month in energy costs. It could also give Israel additional geopolitical clout in the region. Likely destinations for export would be Turkey, which is eager to reduce its dependence on Russian gas, and Jordan, which has seen its Egyptian gas supply hobbled by instability in the Sinai.

Copyright (c) 2012 Dow Jones & Company, Inc.

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