Israel’s Natural Gas Industry Is Breaking the Monopolist’s Hold

In the first of three op-eds, I’ll bash the lies being spread by activists and opposition politicians who want to leave the gas in the ground.

Nehemia Shtrasler
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Energy Minister Silvan Shalom, right, and Yitzhak Tshuva, the controlling shareholder of Delek Group, on a drilling rig, March 27, 2013.
Energy Minister Silvan Shalom, right, and Yitzhak Tshuva, the controlling shareholder of Delek Group, on a drilling rig, March 27, 2013.Credit: Moshe Binyamin
Nehemia Shtrasler

Finance Minister Moshe Kahlon is a nice man with a captivating smile. He’s a bit shy, someone who treats everyone as an equal. But make no mistake about him. When he was a Knesset member his friends dubbed him “the polite pickcket.”

Whenever he bumped into a fellow MK he’d begin a friendly conversation, toss something out, agree on something and go his merry way. The other MK would stand there thinking about the chat and suddenly realize that Kahlon had picked his pocket. Figuratively, of course.

That’s exactly how I felt when I heard Kahlon say on Channel 2 Friday night, without blushing, that the Israeli citizen deserves more.” I know there’s no limit to chutzpah, but to pickpocket public opinion like that?

After all, Kahlon could have been the lead player in the gas deal. He could have improved it; he’s the finance minister. Before the election he promised to handle the issue, adding that his friendship with gas baron Kobi Maimon wouldn’t interfere.

But immediately after the election he made a surprising announcement that he wouldn’t intervene in any way. So what happened?

We expect politicians to set aside their personal interests and even to sever friendships if they interfere with their jobs. After all, it’s intolerable that a finance minister isn’t handling the most important economic issue.

But don’t worry, he’s handling it. He has done plenty to torpedo the deal. He has now repeated that it isn’t good enough – in prime time no less, at a critical moment.

Thus he’s supporting the opponents, demonstrators and opposition politicians who want to scrap the deal and start from the beginning, which means leaving the gas at the giant Leviathan field deep in the ground. And U.S. company Noble Energy has declared that it won’t stomach any more changes after the tribulations it has endured for years. Instead, it will go to court – a matter of six to 10 years.

It’s also interesting that the only cabinet member who opposes the deal is Environmental Protection Minister Avi Gabbay, Kahlon’s Sancho Panza. It’s also interesting that by chance of course, scuttling the deal suits Maimon, the controlling shareholder of Isramco, a partner in the Tamar field but not in Leviathan. Approval of the deal, which would unleash the development of Leviathan, would introduce competition to Tamar and harm Maimon’s interests.

Meanwhile, other politicians are spouting lies about the deal, so I’m discussing a few of them in a three-chapter series; the first one here.

Lie No. 1: “The framework strengthens and perpetuates the natural gas monopoly.” Really? After 50 years during which the state searched and failed to find gas, tycoon Yitzhak Tshuva persuaded Noble Energy and together they found gas. That’s the reason for the monopoly: Simply nobody else found gas.

Then came the government’s so-called framework deal, which stemmed from long, arduous negotiations. The deal weakens the monopoly. It forces Tshuva and Noble Energy to sell the Karish and Tanin fields, forces Tshuva to sell his stake in Tamar in a few years and even reduces Noble Energy’s stake and power in Tamar. Leviathan remains under the ownership of Tshuva and Noble Energy.

We’re thus going from an absolute monopoly to competition among a few companies. It’s not sophisticated competition, but it’s far better than the existing situation. Of course it would be preferable for Noble Energy to leave Tamar entirely, but in negotiations you don’t achieve everything. And competition in the industry will increase the moment the deal finally gets underway and other investors come to the Mediterranean and find gas.

The bottom line: The deal weakens and splits the monopoly – the exact opposite of Lie No. 1.