Israeli Government Approves Revised Gas Deal

Prime minister tries to get some credit for his part in the framework agreement, but opposition leader Herzog gets a mention instead.

Minister Yuval Steinitz and Prime Minister Benjamin Netanyahu attend the weekly cabinet meeting on May 22, 2016.
Emil Salman

The cabinet approved a revised version of the natural gas framework on Sunday, aiming to fix a key part of the agreement that the High Court of Justice struck down two months ago.

The revised framework effectively does away with a controversial “stability clause,” which had committed the Israeli government to not impose any regulatory changes on the natural gas industry for at least 10 years.

“The revised gas framework pact incorporates within it the comments that were received from the High Court of Justice,” Prime Minister Benjamin Netanyahu said. “Now the most important thing is not to loiter, to move forward to and deliver the gas. I think this is a very important, even historical, step for the economy of Israel and in particular its citizens. We’re using a gift bestowed on us by nature for the good of the country and its citizens,” he added.

The framework sets in place the last elements of the regulatory regime for Israel’s natural gas industry. Its final approval should allow the companies developing the giant Leviathan offshore natural gas field to negotiate export contracts and start production there.

Yossi Abu, CEO of the two Delek subsidiaries Delek Drilling and Avner, said the government approval gives a “tremendous tailwind to our continued activity to promote the development of Leviathan, in order for Israeli gas to flow from the reservoir by the end of 2019.”

Delek and Avner, along with Texas-based Noble Energy, are the lead partners in the Leviathan and Tamar fields. The latter is currently Israel’s sole working natural gas reservoir.

However, even as the cabinet was backing the revised framework, opponents warned that they would return to the High Court to try and block it. Gilad Barnea, one the attorneys who petitioned the High Court against the original framework, said the revised terms still committed the government to the natural gas industry, and that could serve as the basis for a new suit.

The Movement for Quality Government said it was also weighing filing a new suit against the revised framework.

Environmental Protection Minister Avi Gabbay was the only minister to vote against the framework yesterday.

“The decision adopts anew the framework, which in the nine months since it was approved has proven to be one big mistake,” he said. “The prices that were set are too high and deter the use of natural gas to reduce air pollution.”

The stock exchange’s reaction to the cabinet backing was restrained, although news that the government and natural gas cartel had reached a new pact was already announced last week. The Oil and Gas index ended up 1.4% at 939.65 points.

Minutes before the ministers were to vote on the framework, Netanyahu gave the floor to National Infrastructure, Energy and Water Minister Yuval Steinitz, praising his work on the issue.

Netanyahu seemingly expected reciprocal praise from Steinitz. But when that didn’t happen, he took matters into his own hands. “Maybe there was someone else who also contributed?” Netanyahu cynically asked Steinitz.

The latter, who didn’t understand the prime minister’s objective, responded that “there were many” others who contributed. “Maybe there was someone else?” Netanyahu insisted.

Steinitz defended himself. “I’m only speaking of those who worked on it in recent days...”

Netanyahu wouldn’t relent. “There was someone else...”

The acting cabinet secretary, Aryeh Zohar, who sat next to the two, tried to come to Steinitz’s aid, but also didn’t understand the nature of Netanyahu’s complaint.

“Bougie should have also been thanked,” he said, referring to opposition leader Isaac Herzog.

Netanyahu, losing patience, finally added, “Maybe the prime minister as well.”

The framework requires the Leviathan partners to have the field up and running by March 2020. To create competition in gas, Noble and Delek have 14 months to sell the tiny Karish and Tanin fields. In addition, Delek will be required to sell its Tamar stake and Noble to reduce its Tamar stake to 25% in six years. However, the framework has no provision for price controls, and the gas companies are not required to renegotiate contracts that have inflated prices.