‘Chevron could open Israel’s energy market to Asia’

Gov’t officials hopeful after news of energy powerhouse’s purchase of Noble Energy

JULY 21, 2020 23:21

The logo of Chevron Corp is seen in its booth at Gastech, the world's biggest expo for the gas industry, in Chiba, Japan April 4, 2017

(photo credit: REUTERS/TORU HANAI)

The entrance of Chevron into the Israeli energy market is a “game changer” that could help the country break further into the European and Asian markets, Energy Ministry director-general Udi Adiri said Tuesday.

Chevron on Monday announced it was purchasing Noble Energy, the operator of Israel’s Leviathan and Tamar natural-gas fields, for $5 billion. It sparked a surge of interest across the globe and was the largest deal of its kind since the start of the coronavirus pandemic.

The takeover increases Chevron’s energy reserves by 18% and partners it with Yitzhak Tshuva’s Delek Group.

“Chevron entering Israel’s market is a game changer,” Adiri told The Jerusalem Post. “One cannot ignore the fact that, up until now, large energy companies did not enter the Israeli market.” He attributed the change to Energy Minister Yuval Steinitz.

“Delek and Noble Energy did an amazing job opening the Jordanian and Egyptian markets [for Israeli gas],” Adiri said. “Now, the challenge is to reach the European market, or even Asian market, as Chevron could do. In that sense, Chevron entering Israel’s market is a game changer.”

News of the deal came on the heels of government approval earlier this week of the EastMed gas pipe. The 1,900-km. pipeline is meant to export Israeli and Cypriot natural gas, via Italy and Greece, to the European Union.

Chevron will hold 35% of Cyprus’s Aphrodite gas field, of which Delek controls 30% and Royal Dutch Shell 35%. Chevron will hold 40% and 25%, respectively, of the Leviathan and Tamar gas fields, pending Energy Ministry approval of the deal.

“The US-Israeli energy relationship remains stronger than ever,” US Energy Secretary Dan Brouillette said Tuesday. US President Donald Trump’s administration fully supports the “development of Eastern Mediterranean gas resources,” he said.

New York University’s Dr. Efraim Chalamish told the Post Chevron “will bring to the Israeli market best practices and know-how from other gas projects globally.”

“Having another major energy US company as part of the proposed EastMed gas pipeline project may be a critical addition, as the project will face high costs and other technical needs as part of its planning and execution phases,” he said.

Chevron is active in 180 countries and is estimated to be worth $163b. It has been active in Saudi Arabia since the 1930s, with a new project currently taking place on the border with Kuwait. It has been seeking oil in the Kurdish zone of Iraq since 2012.

Previously, Arab regimes warned US firms that working with Israel would influence their dealings in the Arab and Islamic world.

Chevron’s decision to go ahead with the purchase of Noble Energy could be another sign of the reported rapprochement between Israel and the Gulf states.

Alternatively, with the world reeling from the COVID-19 pandemic, Chevron might think few governments would confront it over a business decision when jobs are scarce.

While the news is good, the deal still needed to be approved by Noble Energy stockholders, a top executive in the Israeli energy sector said, speaking on condition of anonymity.

“In this sort of deal, the stockholders might decline to sell, hoping to get a better offer,” he said.

Unlike Noble Energy, which suffered a 60% decline in the price of its stocks since January, “Chevron is worth $163 billion, and with any deal concerning the Arab world, once Chevron is on your side, it’s a good reason to be optimistic,” the executive said.

The Israeli market is very small when compared with the markets Chevron is used to working in, and it might be looking to take over Noble Energy’s assets in the US at an attractive price, he said.

“Such large companies didn’t avoid doing business here because they feared Arab reactions,” the executive said. “They did so because we’re a small market, and they didn’t see a point.”

Chevron explained the move to its investors on Monday with expectations that the Noble Energy takeover will “generate strong returns and cash flow with low capital requirements.”

While the Israel Electric Corporation (IEC) is obligated to purchase gas from Noble Energy at a higher cost than what Noble Energy asks for in the US, Adiri thinks this is not the reason Chevron purchased the company.

“The contract is going to be discussed at the end of the year, and it’s likely the IEC will demand a 25% cut off the price it now pays,” he said.

“Israel is a growing market,” Adiri said. “That’s why they’re buying.”