Time for Netanyahu to Step on the Gas

The prime minister needs to stand firm on any gas deal over Israel's offshore gas fields. The country's future wealth may depend on it.

Nehemia Shtrasler
Nehemia Shtrasler
Tamar natural gas rig, located 90 kilometers west of the city of Haifa, Israel.
Tamar natural gas rig, located 90 kilometers west of the city of Haifa, Israel.Credit: AP
Nehemia Shtrasler
Nehemia Shtrasler

Now, as we approach the finish line, a person needs nerves of steel – which is not exactly our prime minister’s outstanding trait.

Delek Group owner Yitzhak Tshuva is exerting pressure. Noble Energy is working its connections. And Prime Minister Benjamin Netanyahu wants it all to be behind him already. Well, in another week it will be. But we’re talking about billions of shekels here concerning Israel’s natural gas program – tens and even hundreds of billions. So the prime minister cannot cave, he cannot yield.

There are several principles in the gas program outline that, if not upheld by Netanyahu, means the whole program won’t be worth a dime.

The biggest argument revolves around the timetable for selling the Karish-Tanin offshore gas reserves. [Delek and Noble are the owners of these, as well as majority owners of Israel’s largest offshore gas fields, Tamar and Leviathan.] The Finance Ministry’s budget division says the sale must be conducted quickly – within 15 months – so Karish-Tanin can be developed speedily and introduce a new competitor to the gas market within five years. No way, say Tshuva’s people. They need at least three years to sell those reservoirs, they say. They can’t be sold under pressure; buyers aren’t exactly queuing up.

It seems to me, though, that Tshuva and his people want to delay the sale of Karish-Tanin to preserve their monopoly for as long as they can. Besides which, Israel’s reality is that within three years, either the nobleman will die or the dog will die, as the old saying goes, and the whole outline will be reopened and revamped.

The problem is that the prime minister’s people sound too conciliatory, too quiet. It’s as if someone at the top told them, “Don’t blow the agreement! Close fast and at any price.” And that’s bad. Very bad. It’s true, the whole thing must be wrapped up within the next week. But the agreement must be fair to both sides and promote competition – and without the speedy sale of Karish-Tanin, there will be no competition in the gas market. That’s the main point of the outline.

That’s why the right course is the one proposed by Amir Levy, the head of the ministry’s budget division, who said during internal discussions that if there is no sale within 15 months, the government should not sign off on the outline. I say, get even tougher. Insist that Tshuva and Noble sell off those reserves within six months. It’s possible, and may even be worthwhile. After all, international gas prices are trending downward, and the minute there’s a program and finally some sort of certainty, buyers will indeed queue up.

There is also a dispute over the maximum price of gas during those five years, until competition is established. Levy wants $5.20 per energy unit, while Netanyahu will agree to $5.40. But Tshuva wants $5.80, which is too much. Here, too, Tshuva must compromise.

On the other hand, those talking about a global benchmark of $2.90 per energy unit are pulling the wool over the public’s eyes – and it’s too bad this is exactly what MK Manuel Trajtenberg (Zionist Union) is doing. He ought to know that there’s no global price for gas, only local prices, because the costs of production, liquefying and transportation are different. Gas is expensive in Europe, and in the United States it’s cheap. In the United States, there are also large price differentials between Texas and New York and Boston. There are countries in the world where natural gas costs a dollar per energy unit, because the government subsidizes it, and there are places where the price ranges from $7-$10, like in Japan, Singapore and Korea.

Our gas is particularly expensive to produce because it is located at an incredible depth: the depth of the water above the reserves is 1.7 kilometers (just over a mile), and the gas is more than five kilometers under the waves. In Texas, if you have a hoe you can dig up a small gas well in your backyard.

It’s also time to understand that this gas is not just “ours,” as the populists say. Tshuva is the one who risked his money and found the gas, after experts insisted Israel had no oil or gas, and that there wasn’t any point in drilling. But because gas is a natural resource, it was decided – through the Sheshinski Committee – that 56 percent of the proceeds will be ours, and 44 percent Tshuva’s, and that’s fair.

Now we must complete the picture with a fair program. For this, Netanyahu must stand firm and not capitulate.

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