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Israel government approves major offshore gas deal

Aug. 16, 2015 9:25 P.M. (Updated: Sept. 22, 2015 11:58 A.M.)
Israel's Prime Minister Benjamin Netanyahu attends the weekly cabinet meeting at his office in Jerusalem on July 5, 2015. (Pool/AFP/File/Baz Ratner)
JERUSALEM (AFP) -- The Israeli government Sunday approved a major deal with a consortium including US firm Noble Energy on natural offshore gas production in the Mediterranean, the prime minister's office said.

The agreement, which was announced on Thursday and is expected to face a parliamentary vote, aims to end months of uncertainty and set a framework for the exploitation of gas discoveries.

It is expected to raise major new government revenues and could provide Israel with strategic leverage in the region if it begins to export gas.

"This money will benefit education, health, social welfare and other national needs," Prime Minister Benjamin Netanyahu said ahead of the cabinet vote, which passed 17-1.

Noble and locally based firm Delek have since 2013 produced gas from the Tamar field off the Israeli coast.

They have also teamed up to develop the offshore Leviathan field, considered the largest in the Mediterranean.

The agreement approved Sunday contains amendments to an earlier version, such as linking the price of gas to an energy index, which is meant to lower costs for consumers.

The consortium committed to invest $1.5 billion to develop the Leviathan field over the next two years.

Israel has agreed not to change fiscal and regulatory rules related to the gas industry for a decade as long as the consortium abides by its commitments.

The talks have been controversial, with many fearing the deal would overly favor the companies involved.

The agreement notes that Israel's anti-trust authority objects to it on the grounds that it does not allow for sufficient competition.

To circumvent that obstacle, Netanyahu's inner cabinet in June declared gas production to be linked to national security, thus allowing the government to override laws related to monopolies.

Netanyahu has pushed hard to speed up gas production in the Mediterranean, drawing criticism from political opponents who accuse him of not ensuring sufficient benefits for the Israeli public in the negotiations.

"The true interests of the state of Israel require the approval of this outline as quickly as possible," he said on Sunday, while declaring he was "not impressed by populism."

Following a controversial agreement last year, a Palestinian power company was set to work with Noble and Delek, although the deal was terminated in March.

The $1.2 billion deal would have seen the gas companies supply natural gas to a future Palestinian power plant run by the Palestine Power Generation Company for a period of 20 years.

Israeli media reported that the deal's termination was the consequence of the antitrust dispute over the two companies.

However, the Palestinian company had also come under intense pressure to cancel the deal following a long running campaign by activists from Boycott, Divestment and Sanctions, PLO members and other campaigners.

The Palestinian power company said it would seek Palestinian natural gas for the future West Bank power plant instead.

Ma'an staff contributed to this report.
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