Israeli Prime Minister Benjamin Netanyahu on Thursday announced a major deal between his government and a consortium including US firm Noble Energy on natural gas production in the Mediterranean Sea.
The agreement is aimed at ending months of uncertainty and setting a framework for the exploitation of gas discoveries that are expected to bring major new government revenue.
Political risks however remain, including a possible vote in parliament, where Netanyahu holds only a one-seat majority.
“The agreement will bring in hundreds of billions of shekels (tens of billions of dollars) to Israeli citizens over the coming years,” Netanyahu said in a televised statement, without providing details.
“I shall bring this agreement to the cabinet on Sunday. I’m sure it will pass by a large majority of votes.”
Noble and locally based firm Delek have since 2013 produced gas from the Tamar field off the Israeli coast. They have also teamed up to develop the offshore Leviathan field, considered the largest in the Mediterranean.
Previous agreements have been criticised by anti-trust authorities, leading to the opening of new talks under intense political pressure. Critics have feared regulations would overly favour the companies involved.
In May, antitrust commissioner David Gilo said he was resigning over his opposition to the dominant position of Noble and Delek in the Leviathan and Tamar fields.
Criticism of existing agreements had unnerved foreign investors eyeing the development of Leviathan, one of the largest offshore gas discoveries worldwide in the last decade. Political and regulatory uncertainty have also been major concerns.
– Cost of living –
Production at Tamar is destined for the domestic market, aimed at guaranteeing energy independence for Israel, which is isolated in the region.
Further production could also provide the country with strategic leverage if it becomes a supplier to the Palestinian Authority as well as countries such as Jordan and Egypt.
Discussions between the government and the consortium have centred on natural gas pricing for Israeli reserves and future production.
Local media have reported that, under the deal, the price of gas will be linked to an energy index, which will result in rates lower than in previous agreements.
The consortium is also said to have agreed to invest $1.5 billion to develop the Leviathan field over the next two years. Failing to meet the requirement would allow the government to back out of a commitment not to alter fiscal and regulatory terms for the gas industry until 2025.
Netanyahu has pushed hard to speed up gas production in the Mediterranean, drawing criticism from political opponents who accuse him of not ensuring sufficient benefits for the Israeli public in the negotiations.
His inner cabinet in June took the rare decision of declaring gas production to be linked to national security — allowing the government to override laws related to monopolies.
The talks have occurred at a time of serious concern over the cost of living in Israel, with the issue a major topic of debate in the run-up to elections last March.