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Israel’s failure to attract major oil companies is a massive blow to its ambitions

New Khaleej | August 28, 2017

Israel has managed to beat its Mediterranean neighbours in the development of its offshore gas industry over the past two decades by discovering 10 gas fields, specifically in the northern waters adjacent to Cyprus and Lebanon. Initially, Israel was concerned with developing the Tamar field, which has about 282 billion cubic metres of gas, and the Leviathan field, which has about 500 billion cubic metres.

Since Spring 2013, gas has been produced from the Tamar field to supply local power stations. Negotiations are underway with neighbouring countries to export Leviathan gas, not to mention changing most of the local power stations to use two types of fuel, gas and oil, rather of depending on only one type, as was the case in the past, either coal or oil.

However, the Israeli gas industry faltered in December 2014, when Israel’s then Antitrust Commissioner accused the Noble Energy-Delek consortium of monopolising all discoveries in accordance with the agreements signed by the gas authorities, as well as monopolising internal gas supplies and the prices of gas and electricity. This resulted in disagreements within the Knesset (Israeli parliament) and civil society over this lawsuit; Prime Minister Benjamin Netanyahu took part, as he considered it a matter of “national security”. The issue was ultimately referred to the courts.

However, middle ground was found in order to rescue the gas industry from the repercussions of the chaos caused by the cancellation of memorandums of understanding for export to neighbouring countries, and the fears of international oil companies about working in Israel due to the fact that approval needed to be obtained from multiple parties, even after the signing of agreements. They were also discouraged by the contradiction in the official institutions’ privileges and the extent of competition in working in Israel compared to other countries.

Some of the largest law firms and public relations companies, especially in the US, have been involved in these disputes. Solutions were reached, with the consortium countries giving up their shares in some relatively small fields, especially in the neighbouring Karish and Karan fields, which are considered the closest to Lebanese waters (about 10 miles away).

Most importantly, the first licensing cycle was announced in September 2016 and began last November. The names of the winning companies were announced on 17 March this year. The agreements with the consortium led by Noble Energy were reached through bilateral talks.

The main objective of the first licensing cycle was the development of 24 offshore blocks adjacent to the Tamar and Leviathan discoveries. The size of some sectors is about 400 square kilometres, while the depth of the water is between 1,500 and 1,800 metres. The cycle aimed to attract international oil companies in an attempt to benefit from their technical expertise and their marketing, industrial and financial capabilities. It also aimed to begin a new era of experience between Israel and the international oil companies, especially after the antitrust authority complaints and changes in the Arab boycott laws.

This was followed by an attempt to break through the boycott in one of the most important economic sectors in the Middle East. Opening this relatively large number of maritime sectors all at once was accompanied by Israel’s interest in the discovery of crude oil in commercially volume in deep geological strata. This was after evidence emerged that oil could be found. Official sources said at the time that independent research bodies estimated the amount of oil that could be found amounted to about 6.6 billion barrels, in addition to 2,137 billion cubic metres of gas.

“Companies operating in Israel [Noble Energy and Delek] are not allowed to participate in the tender, in order to encourage competition,” said Israeli Energy Minister Yuval Steinitz.

The concerned Israeli authorities tried to make the first licensing cycle successful, but to no avail. The energy minister and ministry officials participated in large-scale promotional conferences in London, Houston and Singapore, as well as an “information room” for companies, but did not achieve their goals.

Only four companies have announced their interest, namely Greece’s Energean, Italy’s Edison, an Israeli company that has not been named and Spain’s Repsol. As a result of this low turnout, both in terms of number and significance, and because Repsol is the only one with a prestigious position within the European oil companies, there has also been news in the oil industry about trying to attract international companies to work in Israel, specifically Exxon Mobil, but no agreement has been reached yet.

Due to the scarcity of companies that have shown an interest in participation, especially given the large number of sectors offered to companies and the failure to reach agreements with international companies, the date of the session was extended to 21 April and the results were announced in July. However, with the failure to attract many or important companies, even after the extension, it seems clear that the session will be extended further, perhaps to the first quarter of 2018.

The lack of interest from the major oil companies in the Israeli gas industry has been a massive blow to Israel’s ambitions to attract those with large capital, specialisms and experience in the development of deep offshore fields, and which have the necessary connections to new large market routes (a dilemma Israel faces despite its attempts with Turkey, Greece and Italy). It has also hindered Israel’s desire to compete with Egypt (with the discovery of Eni in the Zohr gas field), in order to become a regional centre for the gas industry in the east Mediterranean.

Translation by MEMO

August 29, 2017 Posted by | Economics, Ethnic Cleansing, Racism, Zionism, Illegal Occupation | , , | 2 Comments

Nationalization, Bolivian Style: Morales Seizes Electric Grid, Boosts Oil Incentives

By Emily Achtenberg | Rebel Currents | May 10, 2012

On May 1, President Evo Morales seized control of Bolivia’s electric grid from a subsidiary of the Spanish-owned Red Eléctrica de España. In a dramatic ritual now familiar to Bolivians as a hallmark of the Morales government on International Workers’ Day, Bolivian soldiers peacefully occupied the company’s Cochabamba offices and draped the Bolivian flag across its entrance.

Coming on the heels of Argentina’s recent move to expropriate Spanish energy company Repsol’s majority stake in its national gas and oil company, the event has generated more than the usual volume of outrage and dire predictions of capital flight from U.S. business interests.

“It’s crazy to invest in Bolivia, and this is a perfect example why,” says Eric Farnsworth, vice-president of the DC-based Council of the Americas. “He’s taking actions that guarantee that investment will dry up further.”

“The left-wing populist strategy of demonizing the investor class has one big drawback: the law of diminishing (investor) returns,” warns Mary Anastasia O’Grady in the Wall Street Journal. In reality, far from abandoning Bolivia, foreign companies have remained actively engaged in its post- nationalization energy sector. This is due in no small part to Morales’s increasingly investor-friendly policies, including his willingness to boost private incentives to meet domestic energy needs.

The takeover of the electric grid, which was privatized in 1997, is part of Bolivia’s overall strategy to re-nationalize companies that were divested by past neoliberal governments, increasing state control over strategic sectors such as natural resources and basic services. Since 2006, Morales has nationalized the country’s gas fields, oil refineries, pension funds, telecommunications, and main hydroelectric power plants.

According to Morales, Red Eléctrica has invested only $81 million in Bolivia’s electric grid since acquiring it in 2002, while drawing around $100 million in cumulative profits. Three of Bolivia’s nine departments remain isolated from the national network. “The government invested $220 million in electricity generation while others profited, so we’re recovering what was ours,” Morales said.

Apart from these ideological and economic considerations, domestic politics also played a role in the May 1 event. Nationalizations have been highly popular in Bolivia, and this one may help Morales shore up support from disaffected constituencies at a time of heightened civic unrest. Still, the increase in power blackouts since the government took over electricity generation in 2010 serves as a reminder that the move could also backfire politically if the level of service does not meet public expectations.

In any case, despite the theatrics of the May 1 announcement, Bolivia’s most recent nationalization has been relatively non-confrontational, especially when compared to Argentina’s move with Repsol. For one thing, the targeted electric company subsidiary generated just 3% of its parent company’s profits, while Argentina’s YPF accounted for 21% of Repsol’s. In an effort to minimize negative fallout, Morales gave Spain 3 days notice of the takeover, whereas Argentina’s President Cristina Fernández refused to meet with Repsol in advance.

After its initial criticism, Spain has acknowledged the legitimacy of Bolivia’s nationalization decision, which includes a promise of fair compensation. Red Eléctrica expects to reach a friendly agreement with Bolivia on the value of its investment, and the parties have agreed to retain a joint appraiser.

On the same day as the electricity grid takeover, Morales inaugurated a $600 million natural gas processing plant in eastern Bolivia with Repsol that represents the single biggest foreign investment under his government. The plant will triple the amount of gas sold to Argentina. Repsol is one of ten gas and oil multinationals that were forced to renegotiate their contracts with Bolivia in 2006, giving the state majority ownership and vastly increasing taxes and royalties under a relatively modest form of nationalization.

“We have a relation of great trust with Repsol,” said Morales, contrasting Bolivia’s situation with Argentina’s. “Repsol respects all Bolivian rules, and its promised investments are going ahead in a good manner.” At the same time, Morales noted, Bolivia’s experience with Repsol shows that nationalization (Bolivian style)  can be a success, providing an instructive example for Argentina.

As Carlos Arze of Bolivia’s Center for Research on Labor and Agrarian Development (CEDLA) points out, six years after Bolivia nationalized its hydrocarbons reserves, not a single foreign oil and gas company has pulled out of Bolivia. Despite the major shift in revenue splits, the firms’ annual profits have remained about the same in dollar terms ($824 million), due to the vast increase in revenues generated by high commodity prices and natural gas exports. Annual hydrocarbons revenues collected by the state have increased from an average of $332 million prior to nationalization to more than $2 billion today.

Still, there have been major setbacks with oil and gas nationalization. While natural gas production has increased, crude oil production has fallen by more than 20% since 2005. With crude oil prices that the state can pay frozen at $27 per barrel (less than a quarter of today’s world price), companies are unwilling to invest in exploration of new reserves. As a result, Bolivia has become increasingly dependent on fuel imports for domestic consumption, with an escalating annual price tag estimated at $755 million in 2012, to subsidize the cost of imported gasoline and diesel to consumers.

In an effort to reduce this dependency and stimulate energy sovereignty, the government instituted a new policy on April 19, boosting incentives for crude oil production from $10 to $40 per barrel (through a $30 tax credit).

The new policy effectively repositions the ill-fated December 2010 Gasolinazo, when the government tried to accomplish the same goals on the backs of consumers by abruptly cancelling the fuel subsidy and dramatically increasing gasoline prices. That policy was revoked after massive protests, sending shock waves through Bolivia’s social and political sectors that continue to reverberate to this day.

Critics of the new incentive, including Arze, believe that it’s just another form of giveaway to the oil companies which far exceeds their production costs, and will still be paid by the public through taxes foregone from the national treasury. They question where the funds will come from, since the government claims it can’t afford higher salaries for striking health care workers and other disaffected sectors. According to the government, savings from reduced gasoline and diesel imports will more than offset the tax incentive cost (estimated at $358 million over five years).

In any case, it’s clear that Bolivian-style nationalization is far from incompatible with continued private investment, and that the Morales government is willing to underwrite the incentives it believes are necessary to accommodate foreign capital. Whether this investor-friendly approach is the best policy for Bolivia remains to be seen, but it’s a far cry from “demonizing” the private sector.

May 11, 2012 Posted by | Economics | , , , , , , | Comments Off on Nationalization, Bolivian Style: Morales Seizes Electric Grid, Boosts Oil Incentives

US State Department condemns Argentine expropriation of YPF Oil Company

Press TV – April 20, 2012

The US has joined Spain and Britain in condemning Argentina’s expropriation of the Spanish-owned oil and gas company, YPF, Press TV reports.

US State Department spokesman Mark Toner condemned Argentina’s nationalization of the oil company, saying his country views the act with negativity.

Toner also warned that the move would ultimately hurt Argentina’s economy.

However, the Argentine government has responded firmly to the criticism, arguing that the decision was taken based on the country’s national interests.

“The project aims at certain states’ rules to lead a strategic company. We do not govern on behalf of the US and the Spanish people,” Argentine Interior Minister Florencio Randazzo said.

Argentine President Cristina Fernandez has slammed the company for failing to re-invest in local oil and gas production, which forced Buenos Aires to pay more than USD 9 billion to import fuel last year.

On Monday, Fernandez announced the decision to reclaim YPF, which was formerly a state-owned Argentine oil company, at a meeting with her cabinet and provincial governors. She said that Argentina had to take back the oil company since it is the only nation in Latin America “that does not manage its natural resources.”

The move to declare YPF Gas a public utility by taking 51 percent of its shares is an extension of the takeover of YPF Oil Company, the major subsidiary of Repsol.

Repsol President Antonio Brufau said on Tuesday that the company would take legal action against Argentina, seeking compensation of about $10 billion.

Meanwhile, the Spanish government has also criticized the move by claiming that Argentina is taking a risk of becoming “an international pariah” if it takes control of the YPF, in which Repsol has a 57.4 percent stake.

April 20, 2012 Posted by | Economics | , , , , , , | Comments Off on US State Department condemns Argentine expropriation of YPF Oil Company

Argentina to nationalize Spanish owned oil firm

Press TV – April 16, 2012

The Argentine government says it will present a bill to the country’s senate for the nationalization of the YPF oil company which is owned by Spanish firm Repsol.

Argentine President Cristina Fernandez said on Monday that the bill would allow the government to expropriate 51 percent of YPF shares, while the country’s oil producing provinces would get 49 percent.

“This president is not going to answer any threat, is not going to respond to any sharp remark, is not going to echo the disrespectful or insolent things said,” Fernandez said.

YPF has been under heavy pressure from the Argentine government over the past two months for not investing enough in the country’s oil fields.

The move has already been criticized by the Spanish government. Spanish officials say Argentina risks becoming “an international pariah” if it takes control of the YPF, in which Repsol has a 57.4 percent stake.

Spain is Argentina’s largest foreign investor and YPF is Argentina’s biggest oil company.

April 16, 2012 Posted by | Economics | , , , , , | Comments Off on Argentina to nationalize Spanish owned oil firm