Israeli Natural Gas Program Fails to Meet Quota

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A factory in Haifa
A factory in HaifaCredit: Pinchas Mualem

Only 10% of the 627 Israeli factories, hospitals, hotels and government institutions that were supposed to begin getting their energy from natural gas have actually been connected to the national pipeline network, figures seen by TheMarker show.

The information was provided by the Energy Ministry after the non-profit group Hatzlacha filed a petition under the Freedom of Information Law. Of the 627, 494 were factories and only 53 of them were getting gas at the end of 2017, although another eight were getting compressed gas.

The reason for the low level of usage is partly due to short-term considerations, namely that until recently the price of petroleum had fallen sharply, making gas less competitive.

Another one, however, was that the six companies that are supposed to distribute the gas to big users have failed to do the job. They say they have had problems getting approvals from local authorities and that the financial incentives provided by the government are faulty.

Israel launched a plan in 2009 to widen the use of natural gas as more and more natural gas reserves were discovered offshore. That including awarding regional monopolies to the six companies to pipe it to users.

“The advantages of switching to natural gas have until now been enjoyed by Israel Electric Corporation and the biggest corporate users,” said Chen Herzog, chief economist at BDO and an energy consultant. While the gas distribution network for the biggest users was developed as a national project, the government let free market forces if and when to develop a network for small users.”

The Energy Ministry is now trying to correct the problem and has budgeted 525 million shekels ($147 million) over 2018-19 to subsidize installation of gas connections. This week the ministry released criteria for the first 200 million shekels of grants under the program.

The plan also includes for the first time sanctions against distribution companies who don’t meet targets, including withdrawing licenses.

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