Israel to Ease Drilling Curbs to Entice Majors to Next Auction

(Bloomberg) -- Israel plans to relax drilling restrictions as it gets ready to offer up more offshore exploration licenses later this year following a lackluster reaction last time around.

From talks already held or planned with some of the world’s biggest oil and gas companies, including Exxon Mobil Corp., ConocoPhillips and BP Plc, it “seems as if there is a lot of interest,” Israeli Energy Minister Yuval Steinitz said in an interview in Washington on Monday.

For starters, curbs on how much can be exported will mostly be lifted, as well as a requirement that drillers have to be able to supply the domestic market. A recent $15 billion deal to sell Israeli gas to Egypt, as well as plans to push forward with the construction of a gas pipeline to Europe, have also improved prospects for getting the fuel to market.

“We understand what wasn’t good enough or promising enough in the last round,” Steinitz said. “We hope this time to see major companies from the U.S. and Europe participating.”

The next round is expected to take place in October or November, after a previous auction only attracted two bidders.

The race to develop offshore energy resources in the Eastern Mediterranean has sped up since Israel discovered the Leviathan and Tamar gas fields almost a decade ago. While those and other finds have spurred talk that the region could become a major gas hub on Europe’s doorstep, local disputes have held up some export projects.

Steinitz played down a row with Cyprus over economic rights to Aphrodite, a gas reservoir that straddles both countries’ waters, saying the parties have yet to resort to international arbitration.

Following Law

“It’s not a big issue,” he said, since around 90 percent of the discovery lies on the Cypriot side. “If there’s no solution, we will go to some kind of international expert who will put his assessment on the table.”

Denying Israel was digging its heels in, Steinitz said it was a matter of making sure the law was followed given the involvement of Israeli companies and investors, “even if it’s not a very big amount of gas.”

His Cypriot counterpart is due to visit Israel soon “in order to try once and for all to resolve” the dispute, and Steinitz said he hoped an agreement can be reached before the end of the year.

Similarly, a maritime dispute with Lebanon over oil and gas exploration could also be settled if “wisdom will prevail,” the minister said. At issue is a block that borders Israel’s maritime zone. It’s more in the interest of the Lebanese to reach a deal given their economic hardship, he said.

Steinitz was in Washington to sign an agreement with his U.S. Energy Secretary Rick Perry to set up the joint U.S.-Israel Center of Excellence in Energy, Engineering and Water Technology.

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