Noble: ‘We say potential, Israelis hear discovery’

Investors should be cautious and differentiate between concepts and reality, says chairman of gas explorer.
By Eytan Avriel Haaretz

The probability that natural gas will be found in the deepwater prospects being explored by Noble Energy and Delek Group – the Leviathan prospect – is 10% to 15%. That is a probability, which by definition does not mean “sure thing.” However, says Charles Davidson, CEO of Noble Energy, he hesitates to talk about the prospect because some people in Israel relate to announcements of potential as though they were announcements of actual discoveries.

“That worries me,” he said on a panel on oil and gas exploration at a conference of the Tel Aviv Stock Exchange in London on Thursday: Oil exploration is a high-risk business.

What Noble does, Davidson said, is manage risk in a portfolio of opportunities. Investors should be cautious and differentiate between concepts and reality. Reality is the gas discovered at Tamar.

At the lowest part of the areas the partners looked at, there is the potential of oil, but – Davidson stressed – that doesn’t mean there is oil there. It has never been tested.

Systems of the type down there can produce oil, Davidson said, but one has to check whether a reservoir of trapped liquids of the type is actually there.

Gideon Tadmor, CEO of Delek Energy, fielded a question about the difference between investment in fossil-fuel exploration for the long-term, and as a speculative investment. In his view the difference lies in the company’s diversification: picking a company involved in one project is speculative. The more projects the company has, the better it is, Tadmor said.

One also has to check the company’s ability to actually do the job, Davidson added. For instance, to drill at Tamar, the partners had to bring in a rig from Africa. By the time the exploration was done, the cost had reached $300 million. Not every company could pull off a job like that.

On the geopolitical risk of drilling in Israeli territorial waters, given claims by Lebanese and Cypriot elements that they own a share, Davidson said Noble employs companies that analyze risks unrelated to the actual drilling, and in their opinion, Israel ranks well. Noble has been working in Israel for 12 years, Davidson said; obviously it feels comfortable about it.

“There are areas more problematic than Israel,” Tadmor added; Israel is relatively safe. “I see no geopolitical risk in our explorations.”

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