Israel’s Supreme Court’s decision on March 27 to block a government plan to develop offshore natural gas fields was disappointing news for oil and gas investors.

“In effect the High Court has shaken up the Israeli energy sector by ruling against the gas regulatory framework deal.” Cyprus Natural Hydrocarbons Company CEO Charles Ellinas told New Europe on March 28.

“International oil and gas companies who were uncertain about doing business in Israel due the lack of regulatory and taxation stability will be even more concerned now,” he said.

“Such companies will fear that after investing billions of dollars to drill and extract gas, future governments may introduce tax or regulatory changes that would reduce the viability of their investments. It will be interesting to see how they react,” Ellinas said, adding that at an earlier stage during the process, when Houston-based Noble was getting exasperated with the continuous delays in the development of Israel’s large Leviathan offshore gas field, it threatened arbitration. “Will it be tempted to go back to this?” Ellinas asked.

Noble Energy Chairman David Stover said the ruling was “disappointing”. “The Court’s ruling, while recognising that timely natural gas development is a matter of strategic national interest for Israel, is disappointing and represents another risk to Leviathan timing.

Development of a project of this magnitude, where large investments are to be made over multiple years, requires Israel to provide a stable investment climate,” he was quoted as saying in a Noble Energy press release. “It is now up to the Government of Israel to deliver a solution which at least meets the terms of the Framework, and to do so quickly.”

On the other hand, Ellinas told New Europe that a delay not of Noble’s making might be playing into its hands. “With oil and gas prices low and the industry in a bad state, and Noble even more so given its loss making performance last year, a delay could offer a respite until the market improves.

In addition, it is rather difficult to find any credible markets for Leviathan gas now, except perhaps Turkey. A delay of one year may prove to be helpful in this respect. It remains to be seen what Noble’s reaction is going to be,” he said.

The Supreme Court ruling is a blow to Israel’s Prime Minister Benjamin Netanyahu who had backed the deal struck between his government and a consortium of gas developers as a path to Israeli energy independence, new regional alliances and billions of dollars in revenue. Critics said the deal gave too much profit to corporations at the public’s expense.

After the court scuttled the deal, Netanyahu said he would “seek other ways to overcome the severe damage that this curious decision has caused the Israeli economy”.

The Israeli Delek Group called on March 28 on the government to rework the agreement quickly. In a conference call with investors, AP quoted a Delek representative as saying: “We don’t intent to put things on hold”.

Asked if after Israel’s Supreme Court decision, Israel’s deals with Cyprus and Greece and possible exports to Europe could also be affected in the long run, Ellinas said that given that development of Cyprus’ Aphrodite gas field in many respects is linked to that of Israel’s Leviathan, such a delay will not be helpful, even though it is fair to say that development of Aphrodite was already receding into the future due to other factors.

“Altogether this is not good news for the development of Leviathan and Israeli gas export plans,” he said.