Is­rael and energy ex­ports: Much hot air about gas

Financial Mirror (Cyprus) - - FRONT PAGE -

Six­teen years af­ter the first dis­cov­ery of com­mer­cial-scale nat­u­ral-gas re­serves un­der the Mediter­ranean off Is­rael’s coast, the coun­try’s tran­si­tion from de­pen­dence on im­ports to energy ex­porter is prov­ing slow, ac­cord­ing to the

This month, the gov­ern­ment will pub­lish a long-over­due out­line for reg­u­la­tion of the nat­u­ral-gas in­dus­try. There will be a new frame­work for pric­ing and com­pe­ti­tion in those fields that have al­ready been dis­cov­ered and li­censed, and a long-term plan for the ex­plo­ration and ex­ploita­tion of yet-to-be­found un­der­sea riches.

Op­po­si­tion politi­cians and NGOs have been con­duct­ing a noisy cam­paign against the Is­raeli-Amer­i­can con­sor­tium that cur­rently holds the li­cences to the largest gas­fields, and against the sud­den haste with which the new gov­ern­ment, sworn in just a few weeks ago, has been con­duct­ing its reg­u­la­tory re­view.

The head of the coun­try’s com­pe­ti­tion au­thor­ity, David Gilo, re­cently re­signed af­ter row­ing with the prime min­is­ter, Benyamin Ne­tanyahu, over how to break up the con­sor­tium’s mo­nop­oly over gas pro­duc­tion. The fi­nance min­is­ter, Moshe Kahlon, re­cused him­self from any de­ci­sions on energy mat­ters, be­cause of his friend­ship with a share­holder in one of the gas­fields in­volved.

Is­rael

can

only

dream

of

hav­ing

the mas­sive gas re­serves en­joyed by nearneigh­bours such as Iran or Qatar. But at a con­ser­va­tive es­ti­mate, there al­ready ap­pears to be enough re­cov­er­able gas un­der Is­raeli wa­ters to pro­vide all the coun­try’s pow­er­gen­er­at­ing needs for 40 years.

Un­der a deal be­ing ne­go­ti­ated be­tween the gov­ern­ment and the con­sor­tium mem­bers, Delek Group of Is­rael and Noble Energy of the United States, the firms will sell two small gas­fields quickly; then in six years Delek will sell its en­tire stake in Ta­mar, the largest field cur­rently in pro­duc­tion, and Noble will re­duce its stake to 25%. That will leave them with Le­viathan, a big­ger field due to come on-stream in 2020.

In re­turn, the gov­ern­ment will re­ject calls for it to im­pose for­mal price con­trols on gas sold do­mes­ti­cally. In­stead it is ex­pected to go for a looser ar­range­ment, to en­sure that at least the price of gas in­side Is­rael is no more than the ex­port price. A limit on ex­port­ing— no more than half of the gas­fields’ out­put— may be eased.

Why, af­ter years of de­lays, is the gov­ern­ment in such haste to strike a deal with the Delek-Noble con­sor­tium and to draw up a new energy pol­icy? Of­fi­cials point to the im­mi­nent deal be­tween Iran and its ne­go­ti­at­ing part­ners to curb Iran’s nu­clear pro­gramme: once it is struck, sanc­tions on Ira­nian energy projects will be lifted and, they ar­gue, all the in­vest­ment will go there.

Like Gilo, the gov­ern­ment’s crit­ics think that in its rush, it is fail­ing to bring suf­fi­cient com­pe­ti­tion to the in­dus­try.

What­ever the mo­tives, Is­rael’s new energy pol­icy should of­fer in­vestors a sta­ble and trans­par­ent reg­u­la­tory regime. Even if sanc­tions against Iran are lifted, that coun­try’s un­re­li­able le­gal sys­tem and poor in­fra­struc­ture mean that it may take years for it to start to at­tract for­eign energy firms. In the mean­time, Is­rael has good prospects of at­tract­ing fresh in­vest­ment, if it gets its rules right. So far only a quar­ter of the coun­try’s wa­ters have been ex­plored.

Hav­ing de­pended on im­ports of Egyp­tian gas un­til re­cently, Is­rael has now signed deals to sell its gas back to Egypt, as well as to another Arab neigh­bour, Jor­dan. Not so long ago Is­rael was hav­ing to go as far afield as Mexico to se­cure energy sup­plies. Now the gov­ern­ment’s chal­lenge is to over­come the public’s ner­vous­ness about selling any of the coun­try’s pre­cious re­serves to out­siders.

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