Israeli Cabinet Clears Tamar Gas Pact

Approval came only after a tense and acrimonious meeting where IEC representatives sought to pressure ministers into last-minutes changes.

The social-economic cabinet yesterday approved the controversial natural gas accord between the operators of the Tamar field and Israel Electric Corporation.

But the approval came only after a tense and acrimonious meeting where IEC representatives sought to pressure ministers into last-minutes changes and the Justice Ministry officials sharply criticized the contract's terms.

"The contract is good for the two parties that signed it, but I'm, not sure it is is good for the public," Deputy Attorney General Avi Licht, said.

Although its terms were sharply criticized, the agreement was approved over a six-month period by IEC's board of directors, the Public Utilities Authority (Electricity ) and other regulators. The contract was originally valued at between $16 billion to $20 billion, but changes demanded by Public Utilities Authority reduced the value by $500 million.

It calls for IEC to buy 3.5 billion cubic meters of natural gas from the Tamar field annually for the next five years, with an option to increase purchases to five billion cubic meters or more.

The Energy Ministry sought a clause that made clear that signing the agreement would not impinge on its minister's ability to allocate rights to the pipeline delivering gas from offshore.

The ministry wants to ensure that Tamar's gas is sold to other customers besides the IEC and that the division of the flow of gas will be made according to the size of the customers. That will ensure that big users can purchase their gas directly.

"Whoever wants to bring in gas must be assured that the government's hands aren't tied and that it can ensure capacity is arranged properly," Energy Minster Uzi Landau said during the deliberations.

But IEC officials expressed vehement opposition to the clause, contending that it would reduce the amount of gas it is entitled to under agreements already signed. In the end, the clause was dropped.

Finance Minister Yuval Steinitz lauded the agreement. In a joint statement with Landau he said the accord "will ensure the supply of blue and white natural gas to the economy starting in 2013 and will lead to a reduction in electricity prices and in air pollution."

But opposition leader and Labor Party chairwoman Shelly Yacimovich thinks otherwise. "It is regrettable that the government gives its backing to such an outrageous agreement, which gives the gas companies monopoly power and charges the public exorbitant prices that will be reflected in a rise in electricity prices over the next decade."