"There is uncertainty about the schedule, about the financing," Davidson told a business conference, referring to the so-called Sheshinski committee's recommendation to sharply raise the government's take on oil and gas revenues through a progressive tax on companies that ranges from 20 to 60%.
The committee, set up by the Finance Ministry which believes its take is far too low, has recommended new royalty rates would be applied to existing fields such as Tamar, which has an estimated 8.4 trillion cubic feet of gas. The recommendations have not yet been adopted.
"The committee would remove 60% of the value of the project and transfer it to the state. This would represent a major policy change in Israel," Davidson said. "Gas markets would have to change to accommodate such a policy shift and puts a lot of uncertainty on the project and needs a quick resolution."
He said the changes would result in one of lowest returns on deep water projects in Noble's global portfolio.
Delek Energy chief executive Gideon Tadmor warned that adoption of the recommendations as is would result in Israeli customers being dependent on imported gas. Delek Energy, a subsidiary of conglomerate Delek Group is one of Noble's Israeli partners in the Tamar prospect.
"We and our partners are in a very complicated situation only because they went back on guarantees given us," Tadmor said. "We need to guarantee fair returns for the investors."
He told Reuters on the sidelines of the conference that if the panel's proposal is adopted retrocatively for Tamar, "it would make it very difficult to develop under the current timetable."
"It would put us in a very grave situation," Tadmor said.
Infrastructure Minister Uzi Landau said it was crucial to develop the Tamar field on schedule because Mari-B, the only Israeli gas prospect in production, would be depleted by 2013. This would leave Israel dependent on foreign gas, he said, referring to gas imports from Egypt.
Landau said his ministry would do everything it can to guarantee that Tamar is in production by 2013 "because the people of Israel deserve to benefit from its natural resources".
'Price of natgas in Israel far below global prices'
Davidson said Israel's energy environment was unique - energy infrastructure in the country is limited and Noble and its partners will have to put in place pipelines, delivery systems and storage, in contrast to the United States where customers have their own storage.
In addition, the price of natural gas in Israel is far below global prices, Davidson said.
"That's a benefit we provide but it has an impact on the return of the project," Davidson said. "The solution is to keep in mind ... fair takes also means fair returns."
The government must keep in mind the benefit of energy security resulting from not having to depend on imported oil.
"As we move forward we think we will reach an appropriate solution," Davidson said.
Production from Mari-B, has generated $1 billion a year in energy savings for customers in Israel by displacing imported oil and liquid fuels used to generate electricity, Davidson said. This gas has been priced 75% lower than liquid fuels replaced by the gas.
As Tamar comes into production that savings will amount to $1.5 billion a year and could reach several billion dollars a year in savings to Israel, he added.
"It's a challenging project," Davidson said, noting Tamar was also the deepest of all gas discoveries last year.
Another site off Israel's coast called Leviathan has been estimated to have gross unrisked mean resources of 16 trillion cubic feet of natural gas.
Davidson said a more full evaluation of the Leviathan prospect was expected by the end of the month.
- Follow Ynetnews on Facebook