Israeli Energy Minister: New Gas Proposal Is Good for Israelis, Difficult for Energy Companies

Yuval Steinitz: Only we and the U.S. restrict exports, sets a ceiling for gas prices and remove companies that drilled from discoveries they made.

Bloomberg

The Israeli government team negotiating with the companies representing the domestic natural gas monopoly has presented a new proposal it asserts will benefit Israeli citizens while allowing production to go proceed.

“The proposal is good for the state and its citizens. It is reasonable – but it is difficult for the energy companies," said Energy Minister Yuval Steinitz at his office on Tuesday. "They will have to accept tougher conditions than in all the OECD countries. Over the coming decades, a hundred billion dollars will come to the citizens of Israel. Within a few years, the monopoly will be broken up so gas can be supplied at reasonable prices."

Earlier this week, Prime Minister Benjamin Netanyahu’s attempt to get the latest proposal approved without presenting it was thwarted when he failed to muster a majority for a Knesset vote.

According to the current proposal, Noble Energy and Delek will sell the small Karish and Tanin gas fields within 14 months, and within six years, Delek will sell its (31.25 percent) holdings in the Tamar gas field, while Noble’s share in the gas field will be reduced from 36 to 25 percent and it will relinquish its veto power. In return, the companies will be granted an exemption from a restrictive arrangement in the Leviathan gas field – which will enable them to continue cooperating in developing it – and Noble will retain cross-ownership in Tamar and Leviathan. In addition, the price of gas will not be subject to supervision, but rather a “temporary ceiling” will be set and the inflated Tamar contracts that were signed will not be opened up.

“The proposal is difficult for the companies because it places three restrictions upon them that are not there in any OECD country: an export restriction, price restriction and ownership restriction.

“We are the only country besides the United States that restricts exports, sets a price ceiling for the gas and removes companies that drilled from discoveries they made. These are demands that the gas companies were compelled to compromise on.”

Steinitz bemoaned the delay in developing Israel's major reservoirs and asserted the latest proposal is a practical step to meet an immediate need.

“The fact that development of Israel’s largest natural gas reservoir has been delayed for years should raise questions. If it was discovered in 2010, why hasn’t development started yet? If we delay more, it will cause serious damage – the problem of energy redundancy and relying on a single pipeline, our ability to leverage the natural gas strategically and politically will be hampered, as well as our ability to supply gas to factories at reasonable prices in Israel, and of course, all the revenue from the gas will be delayed," he said.

“The proposal we have reached is the best possible, realistically speaking. In an ideal world there may be other proposals. But we are living in the real world and we need this gas to get to Israel. This proposal will enable the development of Israel’s gas fields as quickly as possible and bring other companies that will search for gas and oil."

The presentation of the proposal was made in Steinitz’s office, with National Economic Council head Professor Eugene Kandel, Finance Ministry budget director Amir Levy, Gas Authority chair Alexander Warshawsky, Natural Resources Administration chair Yossi Wirtzburger and Professor Eytan Sheshinksi in attendance. Following the presentation of the proposal, it will be publicized for a public hearing that will last two weeks.

The original proposal hammered out between the government negotiating team and the gas companies was presented to them back in February. Two months later this proposal was replaced by a somewhat more moderate proposal, which sparked the resignation of Professor David Gilo as the Antitrust Authority Director.

Meanwhile, Prime Minister Netanyahu hailed the new proposal at the start of a meeting with Italian Foreign Minister Paolo Gentiloni on Tuesday.

“Today, after years of discussion, we are presenting the detailed proposal we formulated regarding extraction of the gas from the water. It will be presented to all Israelis and to the whole world. This outline breaks up the gas monopoly and will bring hundreds of billions of shekels to the state coffers – for welfare, health, education and many other needs," he said.

“Populism is surging all around us. No one has practically examined this proposal and now it will be possible to do so. I never surrender to populism. In the face of fierce opposition, I carried out many reforms that saved Israel’s economy. And now, looking back over the last 10 or 15 years, one can see how Israel’s economy has soared, while other economies that did not make such reforms and did not act as we did and surrendered to populism have been severely shaken, to the point where some are on the brink of collapse. And I can also say that in some of them the gas still remains underground. We can’t let that happen here. I trust the good sense of the Israeli people and I expect responsibility from the public’s representatives. We will do everything to ensure that the gas is extracted from the water.”