Economy Minister Dery Says Natural Gas Deal Must Be Changed, Urges Public Debate

Economy minister tells conference current formulation should be seen as draft for public debate.

Dudu Bachar

Economy Minister Arye Dery said Thursday that the government's controversial framework deal for Israel's natural gas market still needs to be amended, urging officials to increase transparency by involve the Knesset and public in the process.

“The gas framework presented this week must be changed,” he told a conference of the Israeli Association of Publicly Traded Companies. “The framework should be a draft for a debate. Even I don’t see it as the final word. There are changes that need to be made on price supervision, regulation, price stability and other things. Sunlight is the best disinfectant. It won’t be easy or pleasant, but I think in the end we’ll say this was the right way,” Dery said.

The minister spoke days after Prime Minister Benjamin Netanyahu agreed to release the terms of the framework after failing to enlist a Knesset majority to approve the deal, safeguarding it from anti-trust scrutiny in the future. The government has come under fire for reaching terms with gas firms with little public input.

The terms, many of which had been leaked even before National Infrastructure, Energy and Water Minister Yuval Steinitz revealed them at a press conference on Tuesday, have come under sharp criticism for failing to break up the market power of the two companies that control the lion’s share of Israel’s natural gas reserves.

The framework would require the Delek Group to sell its stake in the Tamar gas field and for its American partner Noble Energy to dilute its holding, but it lets the two keep control of the much bigger Leviathan field. It also exempts them from anti-trust scrutiny for as much as another 15 years and imposes a price cap rather than controls.

But Gideon Tadmor, chairman of Delek Group’s energy unit, said the terms were already onerous and expressed worry about further public debate over the framework.

“The problem is that gas has become a political bargaining chip. There is an absurd obsession among certain radio programs and newspapers,” he told the conference. He said there were opposition parties in the Knesset that had supported the framework until its details were released. “What is this is not political brinkmanship?”

Tadmor pointed to the price issue as central to the debate and took aim at the gas companies’ critics.

“They ask us, the production cost is 50 cents and you’re selling it for $5.50 while the price of gas worldwide is falling. Why can a price like that be justified? And I say, the framework is a difficult one and imposes restrictions never seen before in the Western world. They are taking away our assets to break up the monopoly. There are price controls and caps on exports,” Tadmor said. “If we compare the price to the price in Europe it seems we’re the cheapest. Here too, the public is being manipulated.”

He compared the 15-year exemption from further anti-trust moves to a company like Teva Pharmaceuticals getting a patent for its highly profitable multiple sclerosis treatment Copaxone. “Why doesn’t anyone ask why Teva’s Copaxone got 17 years of [patent] protection?” he asked.

David Gilo, the antitrust commissioner, said last month he was stepping down to protest the antitrust elements of the framework, which he said failed to ensure competition. But his predecessor, David Tadmor, defended the decision to grant Noble and Deleke antitrust immunity.

“The clause that gives a commitment to not touch the [framework] agreement for 10 years is without precedent,” Tadmor said. “[But] because the country is known for its zig-zagging [on policy], there’s a good reason to give the public and the developers regulatory stability by a clause like this, which will encourage investment.”

Moshe Gafni (United Torah Judaism), chairman of the Knesset Finance Committee, signaled that the framework would face a tough fight in the Knesset, which has become more and more 'social' in terms of economic policy.

“When people speak about social, they start thinking, ‘Wait a minute. What is this that we gave the nation’s resources over to a small group at a time when people are living in crates?’ We start thinking, ‘the gas is ours, it belongs to the citizens of the country.’”