About two years after the declaration by the Israeli Antitrust Authority’s General Director, according to which the Delek Group and Noble Energy are operating within a restrictive arrangement that damages the market terms, it appears that the parties are close to reaching a settlement agreement with the Israeli Antitrust Authority. The declaration of a restrictive arrangement is a result of a deal the parties engaged in to cooperate in developing the reserve and marketing the gas that is likely to be found therein, without requesting an exemption from a declaration of a restrictive arrangement.

Within the settlement agreement that is currently forming, the Delek Group and Noble Energy are likely to disclaim their holdings in relatively small gas discoveries near Israel’s shore (Tanin and Karish), and in consideration, the declaration of a restrictive arrangement will be lifted.

The settlement agreement’s main objective is enabling a new player to enter the Israeli natural gas market. The new player will be able to compete with the Tamar and Leviathan Reserves, held by Delek and Noble Energy.

The small gas discoveries are Karish and Tanin, and together, they contain proven reserves of 70 BCM (billion cubic meters), and an additional 26.6 billion potential cubic meters. Delek and Noble Energy are likely to sell their share to a third party, that will receive a benefit within the settlement agreement, within which, should the gas reserves in Karish and Tanin be lower than the minimum quantities the Authority determined (70 BCM), the buyer may buy the missing quantity from Leviathan at a discount compared with the market price at that time. In consideration, gas from Karish and Tanin will only be transferred to the local market.

Karish and Tanin’s future buyer is not only waiving the option to export the gas, but it may also have to waive oil rights in the permit areas, if and insofar as such shall be found, as well as the rights to sell gas production by-products. In addition, the Ministry of Energy and the Petroleum Commissioner did not yet state their clear stand regarding the splitting of rights as said.

It appears that one of the advantages the new buyer will enjoy is the use of Delek and Noble Energy’s infrastructure in order to flow the gas to Israel’s shores, thus saving the high costs of developing infrastructures.

The estimates are that such a deal may be made soon and the time limit was not revealed. One may assume that the two companies are already engaging in vigorous negotiations with potential buyers.

The profitability of a deal as said is still not clear at this point.

On the other hand, a new, independent player entering the field may contribute to competition in gas supply in Israel.

The above said is stated in general terms and does not constitute a legal opinion.

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This is a general document and does not constitute counseling, and it may not be used as said in any case without receiving specific legal counseling and/or an opinion according to particular circumstances. In any case, we believe it is advisable to examine the legal repercussions ahead of time, prior to taking any action.