UPDATE 2-Israel to keep most of its natural gas for domestic use

Wed Jun 19, 2013 11:57am EDT

* Exports will make up 40 percent of reserves

* Israel will get $60 billion from 20 years of gas sales

By Steven Scheer

JERUSALEM, June 19 (Reuters) - Israel said on Wednesday it will keep most of its newfound natural gas for domestic use but will still allow enough exports to satisfy exploration companies seeking access to the global market.

The decision to keep 60 percent of the country's estimated reserves, which means about 540 billion cubic meters (bcm), ended months of uncertainty during which drilling groups threatened they would not continue developing the offshore wells unless they were allowed significant exports.

"The decision balances between the need to ensure a cheap and available source of energy for Israelis and the need to export," Prime Minister Benjamin Netanyahu told a news conference. "This amount of gas will meet our energy needs for at least the next 25 years."

Israel will receive $60 billion in taxes and royalties from the sale of gas over the next two decades, he said.

Energy Minister Silvan Shalom reassured exploration companies that the export quota "will encourage investors to develop the gas fields that still need to be developed".

Two of the world's largest offshore fields from the past decade were found in Israeli waters. Texas-based Noble Energy led two groups that in 2009 found Tamar, with an estimated 280 bcm, and a year later Leviathan, with an estimated 530 bcm.

Australia's Woodside has agreed to purchase a 30 percent stake in Leviathan, but officials have said the deal would only be finalised after Israel sets its export policy.

Shares in Israeli exploration companies rose compared to declines in the broader Tel Aviv market. Avner Oil closed up 0.7 percent, Delek Drilling gained 1.7 percent, along with Delek Group 0.5 percent, Isramco 1.1 percent and Ratio Oil 0.8 percent.

Wednesday's decision, which will be voted on by the cabinet next week, was a departure from a recommendation made last year by a government committee to export more than half of Israel's gas.

That recommendation sparked a months-long debate in which environmentalists and a number of lawmakers accused the government of giving away too much of Israel's resources.

Exploration companies lobbied strongly for a larger export quota, saying the Israeli market alone was too small to warrant further investment.

"The decision is good and balanced," said Yaniv Pagot, chief strategist at the Ayalon Group.

The stakeholders in the gas fields will take a hit with the new limitation on exports, he said, but added, "this is no industry-wide earthquake".

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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