Israeli Natural Gas Royalties Top 1 Billion Shekels in 2020

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The Israeli Leviathan natural gas field in the Mediterranean Sea.
The Israeli Leviathan natural gas field in the Mediterranean Sea.Credit: Jack Guez / AFP

Israel’s state coffers received more than 1 billion shekels ($303 million) in fees and royalties from offshore gas sales and mining operations, according to the 2020 report from the Energy Ministry’s natural resources bureau.

The country’s revenue from natural resources totaled 1.1 billion shekels in 2020, versus 864 million in 2019.

The main increase was due to natural gas revenues, which totaled 1.09 billion shekels, a nearly 30% increase from 2019. The Energy Ministry explained that the increase was due to a 48.4% increase in natural gas production from Israel’s large offshore gas reserves, after the Leviathan reserve came online at the end of 2019. Natural gas exports to Egypt and Jordan also increased after the Leviathan reserve came online.

Israel’s revenues from the Tamar offshore reserve totaled 592 million shekels, a 29% decrease versus 2019. Some 8.27 billion cubic meters of gas was extracted from Tamar last year. The Energy Ministry explained that the decrease in revenues was due to a drop in natural gas prices. Last year, the majority partners in Tamar sought to sell gas for $4.30 per heat unit to the Israel Electric Corporation, significantly less than the price in previous contracts.

The average price of gas sold from the Tamar reserve as of December 2020 was $4.80 per heat unit, versus $5.12 as of December 2019 – a 13% decrease. In shekel terms, the decrease was even sharper because the dollar lost value against the shekel over the past year. This had a significant impact on electricity prices in Israel.

In addition, Tamar saw a drop in gas sales by quantity as the IEC shifted some of its acquisitions to Leviathan.

This was also the first year that Israel received royalties from Leviathan’s gas sales. The state received 499 million shekels in total, reflecting some 7.32 billion cubic meters in gas sales. This included 273 million shekels from natural gas exports, or 54.7% of Leviathan’s total sales.

The state also received some 8.7 million shekels in royalties from mining operations, and another 4.9 million shekels in fees.

The Energy Ministry forecasts some 1.15 billion shekels in royalties for 2021.

On top of royalties and fees from mining and natural gas extraction, Israel’s government collected for the first time ever the so-called Sheshinsky tax on natural resource profits due to natural gas extraction.

The Tax Authority estimates that Israel will receive more than 1 billion shekels this year in Sheshinsky taxes. Currently, only the Tamar reserve is required to pay this tax; the Leviathan reserve is exempt until 2026.

Energy Minister Yuval Steinitz stated that Israel is expecting revenues of some 3 billion shekels this year on all forms of natural gas-related taxes, including royalties, corporate tax and Sheshinsky taxes. The country can expect this figure to increase to more than 10 billion shekels within a few years, he added.

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