Don’t Give in to Israel's Gas Monopoly

If the government is incapable, at this stage, to break up the gas monopoly, it must at least supervise it properly and set red lines that the monopoly cannot cross.

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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

The security cabinet is due to debate the final compromise hammered out with the gas companies next week, following pressure from the prime minister’s aides to approve the agreement as soon as possible.

The security cabinet was required to deal with the agreement after Antitrust Commissioner David Gilo’s resignation. Gilo, who took steps to dismantle the gas monopoly, albeit belatedly, was treated acrimoniously by his colleagues and by Prime Minister Benjamin Netanyahu.

It is hard to overrate the importance of the issue at stake – developing the Leviathan gas reserves. The entire Israeli energy market depends today on one pipe that delivers gas from a single active gas reserve (Tamar). Israel also has a clear interest to develop and encourage investments into natural resources that can potentially advance the economy.

At the same time, in order to preserve economic and social stability, the ministers, headed by the prime minister, must protect the interests of the Israeli people. They must see to it that Israelis pay a reasonable price for gas derivatives, from electricity to various products.

If the government is incapable, at this stage, to break up the gas monopoly, it must at least supervise it properly and set red lines that the monopoly cannot cross. It must do so without responding immediately to every demand or whim on the monopoly’s part.

The government must receive guarantees for the Leviathan reserves’ development date, which has been postponed repeatedly. Refraining from developing the reserves so far is serving the gas companies as a means of pressure to toughen their positions. The state must also reject out of hand the gas companies’ demand to export gas from the Tamar reserve, until the Leviathan field is linked to the beach and gas flows from it.

The Tamar reserve will soon become an extremely profitable project, even in its current activity framework, and will yield its owners huge proceeds on their capital. The request to export gas from this reserve is only intended to make more profits in addition to the considerable profit the gas companies receive. Agreeing to this request could lead to the depletion of the only reserve that serves Israel’s needs at this time.

To avoid supervising the prices – a move the gas companies strongly object to – the state is required to set up an apparatus that will moderate the expected rise in the gas price, which is already not competitive.

The reasons for restraining the gas companies are not merely economic. The Noble Energy-Delek monopoly bought the licenses that led it to discover most of the state’s gas reserves fair and square. But giving this monopoly excessive economic power, without any state supervision or control, could affect not only the consumers’ pockets and the cost of living in Israel, but also the state’s politics and the magnates’ involvement in it. It could even affect the democracy’s stability. It is the duty of Netanyahu and his government to stand guard and prevent such a situation.

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