MKs Demand State Comptroller Look Into Sheshinski C'tee Methodology

The state should increase its share from future oil and gas revenues from 30% today to between 52% and 60%, the Sheshinski Committee said.

The Sheshinski Committee yesterday handed down its final decision on the state's take from exploitation of natural gas found in Israeli territory - and triggered a plea from the Knesset State Control Committee for the state comptroller to examine how the panel members reached their conclusions.

The state should increase its share from future oil and gas revenues from 30% today to between 52% and 60%, the Sheshinski Committee said yesterday. This is much lower than the 60% to 70% it had recommended in its interim report.

Dov Khenin
Tomer Appelbaum

The committee, led by Eytan Sheshinski, was appointed by the government to recommend changes in fiscal policy for Israel's natural resource sector, in wake of the large gas finds under the Mediterranean seabed. It has come under heavy pressure from the gas companies and their lobbyists not to increase the government's take (see box ).

The committee's recommendations still need to be approved by the cabinet, which is expected to vote on them in February. Once they obtain cabinet approval, they need to be passed into law by the Knesset. The Finance Ministry hopes the final vote will be taken before the Knesset breaks for Passover in mid-April.

Meanwhile, The Knesset State Control Committee decided yesterday to ask State Comptroller Micha Lindenstrauss to look into how the Sheshinski committee arrived at its recommendations and into how the various government ministries have drafted policy concerning the country's gas reserves.

Several opponents of the committee's recommendations attended yesterday's Knesset meeting, including Delek Drilling CEO Gideon Tadmor.

"The Sheshinski committee overstepped its mandate, caused [the government] to renege on oral and written commitments and damaged Israel's natural gas market," Tadmor said during the meeting. "The finance minister promised orally and in writing that the findings would not apply to the Tamar gas field, which is Israel's largest infrastructure project. We've invested NIS 1.5 billion in the drilling, but no bank will finance a project that lacks certainty."

The Sheshinski committee, he said, "set a world record of discrimination against local Israeli products." Instead of encouraging natural gas projects, "they're making it such that [gas reserves] won't be developed and will be left underground, and then they'll praise Egyptian gas. If there isn't Israeli gas, there won't be Egyptian gas."

Attorney Dan Carmeli from the Federation of the Israeli Chambers of Commerce, said, "The state comptroller needs to look into the fact that the Egyptian supplier [EMG] is exempted from tax. This discriminates against Israeli gas. It's unusual to exempt one specific company."

Uri Aldubi, president of the union of gas and oil exploration companies, warned that if the Sheshinski Committee recommendations are adopted by the government, "There won't be any more oil and gas exploration in Israel."

State Control Committee Chairman MK Yoel Hasson said, "The vehement objection of the National Infrastructure Ministry - the responsible, professional ministry in this regard - to setting up the Sheshinski committee raises questions about how the committee was allowed to proceed. Yet again, the Finance Ministry's stance took preference over the professional stance, and as in the Carmel fire crisis, we're being financially petty."

Finance Ministry officials attending the meeting expressed their support for the Sheshinski committee.

MK Dov Khenin asked how the drilling and exploration licenses were allocated, who investigated environmental risks and why the royalties for exploiting natural resources had not been raised at any time over the past half-century.

Deputy Finance Ministry Yitzhak Cohen said in response, "The committee did professional work that will lead to the development of the gas sector and proper division of resources."

Shaul Meridor, deputy budget director at the Finance Ministry, said, "The government's policy on the matter was set in the 1950s and has changed little since then, and the government needs to examine it anew. [The Sheshinski committee's] mandate is to propose changes regarding gas and oil policy for reserves that both have and have not been discovered."