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With Chevron in the Game, Israel Needs to Step on the Gas

Haaretz Editorial
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The Tamar gas field in the Mediterranean Sea, September 2, 2015.
The Tamar gas field in the Mediterranean Sea, September 2, 2015.Credit: Tomer Appelbaum
Haaretz Editorial

Chevron, the second largest energy company in the United States, completed its huge $4 billion acquisition of Noble Energy last week. With this purchase, Chevron also acquired a foothold in Israel’s natural gas market, via the Tamar and Leviathan fields.

The entry of this international giant offers an opportunity for accelerated development of Israel’s gas reserves, which could benefit ordinary Israelis in the years to come. But it also entails very big risks, including undermining the state’s sovereign power, corrupting institutions of government, weakening the regulators and creating major environmental hazards.

Back in 2014, then-Deputy Attorney General Avi Licht issued a serious warning about the potential ramifications for Israel of the fact that Noble Energy and its Israeli partner, Delek, were becoming a powerful monopoly. Licht, like other regulators, feared the effect of concentrating resources in the hands of the few, including potentially destructive effects on democracy and on Israel’s ability to continue to operate as a sovereign state. “The market power this group represents raises concerns about the level of competition in this market and its consequences for consumer prices,” he wrote. “But the problem is even broader. There is a fear of an economy-wide concentration of power.”

Six years after Licht issued that warning, its validity has been redoubled. Last week Noble, now a subsidiary of Chevron, refused to supply the Israel Electric Corporation with gas from the Tamar field at the lower price that Tamar’s other partners had agreed with the IEC. Noble was willing to supply gas only at the price specified in the old contract, $6.3 per million British thermal units.

It claimed that the agreement on the lower price was invalid, and as Tamar’s operator, it refused to provide the gas. In response, the IEC and some of Tamar’s other partners filed a hasty petition to the Israel Competition Authority in which they accused Noble of abusing its monopoly power and called for a criminal investigation into the company and its executives. A Knesset committee is slated to discuss the issue Wednesday.

When Licht issued his warning, Noble was valued at around $15 billion. Chevron, in contrast, has a market capitalization of $140 billion. Chevron’s enormous power merely underscores Israel’s need for strong regulation, top-level professionals and a leadership that puts the good of the general public above the welfare of the tycoons. Israel will be judged in the coming years on its ability to open the gas market to competition, reduce natural gas prices for the benefit of all its citizens and keep the gas flowing while also imposing strict environmental safeguards.

The above article is Haaretz’s lead editorial, as published in the Hebrew and English newspapers in Israel.

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