Israel gas explorer shares sink as Eni’s Egypt find dims outlook

SHOSHANNA SOLOMON

TEL AVIV (Bloomberg) -- Shares of the natural-gas exploring units of Delek Group Ltd. plunged the most in 14 years in high volume on concern the discovery of the Mediterranean’s largest field off the coast of Egypt will curtail their exports.

Delek Drilling LP and Avner Oil Exploration LLP, partners in the Leviathan field, declined the most since 2001 in above-average trading volumes at the close in Tel Aviv after Eni SpA discovered the “super giant” field that it says may hold 30 Tcf of gas, enough to contribute to Egyptian supply for decades. Delek Group dropped 12%, the biggest loss since Dec. 23. Ratio Oil Exploration 1992 LP fell 23%. The companies are jointly drilling Leviathan, Israel’s largest offshore field, with Houston-based Noble Energy Inc.

The discovery threatens to undermine potential demand from Egypt and the region once Israel’s field comes online, sometime in 2019. The development of Leviathan has been held up since December due to wrangling over government energy policy. Meitav DS Investments Ltd. recommended selling Delek, Avner and Ratio after the Egyptian discovery was announced.

“This is a wake-up call for the government” said David Shrem, an energy analyst at Sphera Funds Management Ltd., which manages about $1 billion in assets. “This is not positive. It is still early to say but there may be a scenario in which the Egyptian field may be developed before Leviathan.”

The TA-Oil & Gas index slid 13%, the most on record, while Egypt’s benchmark EGX 30 Index advanced 2.8%, the most since Aug. 27 as the gas find boosted outlook for manufacturers.

Companies developing gas fields in Israel have been planning to export the fuel to Egypt and the region, including Jordan and the Palestinian territories.

Development of Leviathan field, estimated by Delek to have 21.9 Tcf of natural gas and earmarked for export, stalled as the Israeli government formulated its energy policy. The plan, pending approval by parliament and the economy minister, would allow Israel to export as much as 1.5 Bcfgd by 2025, Barclays Plc has said. That’s more than half of Norway’s average shipments to the UK.

Delek Drilling is exploring all options for Leviathan, CEO Yossi Abu said today in a phone call with analysts. The window for the development of the field is still open, even if more challenging.

Meitav analyst Eran Yunger warned the Egypt find was liable to make Israel’s Leviathan “unnecessary.”

“The drops in the shares emphasize the heavy price paid to bureaucracy and disorderly decision-making,” Idan Azoulay, a money manager at Epsilon Investment House Ltd. in Tel Aviv, said by email. “There could be long-lasting effects on the local macro picture, starting from an impact on the shekel, inflation and the profitability of the manufacturing sector. This is bad news for the economy.”