Steinitz, Netanyahu postpone vote on gas compromise outline

National Infrastructure, Energy and Water Minister Yuval Steinitz, in consultation with Prime Minister Benjamin Netanyahu, decided on Tuesday to postpone the vote on the controversial natural gas compromise outline slated to take place on Wednesday.

“In accordance with the advice of Deputy Attorney-General Avi Licht, due to the short time frame remaining for preparing the final outline for government approval, including rushing a special cabinet meeting on Wednesday morning, I decided in consultation with the prime minister to postpone the approval of the outline in the government and the Knesset, in order to allow a regulated discussion and government approval,” Steinitz said.

Votes on the outline in both the cabinet, and afterward in the Knesset plenum, were expected to take place on Wednesday, prior to the legislature’s summer recess. The gas compromise outline in question is the result of more than half a year of negotiations aimed at settling disputes that have largely frozen the country’s gas sector.

Negotiations on the outline have been going on since December, when Antitrust Commissioner David Gilo announced that he would review whether the market dominance of the Delek Group and Noble Energy constituted an illegal “restrictive agreement.” A series of negotiations among the gas companies and government officials followed, leading the

National Infrastructure, Energy and Water Ministry to release terms of a compromise outline to the public on June 30. Gilo announced his resignation, to take effect at the end of August, in protest against the outline.

Members of the public then had three weeks after the release to submit their reactions, after which a hearing took place last Wednesday and Thursday.

On Tuesday evening, Channel 2 reported that the document’s public hearing committee members were recommending a number of changes in the current version of the outline – including lowering the proposed price ceiling and changing the price supervision scheme, which they described as “too soft.” In addition, the committee members reportedly supported expedited development of the Leviathan reservoir, the construction of an additional gas pipeline, and renewed negotiations with the gas companies.

Last week, just two days before the public hearing, State Comptroller Joseph Shapira issued a report slamming the country’s various regulators for failing to coordinate natural gas policy. Shapira stressed that their behavior has led to a situation in which Israel has only one gas supplier, one gas pipeline, no backup storage and no new development on the horizon. The state comptroller discussed the need for gas price supervision, demanding that the government evaluate a variety of means to ensure a competitive market.

If no changes are made to the current version of the outline, Delek subsidiaries Delek Drilling and Avner Oil Exploration would need to exit the 282b. cu.m. Tamar reservoir, whose gas began flowing to Israel in March 2013, and sell their assets there within six years. Houston-based Noble Energy could remain the basin’s operator, though would need to dilute its ownership from the current 36 percent share to 25% within the same time frame.

The Delek subsidiaries and Noble Energy would need to sell their holdings in two much smaller offshore reservoirs, Karish and Tanin, within 14 months.

With regard to the Leviathan reservoir, the companies would be able to remain without any change in ownership. The government would reserve the right, however, to require separate marketing of gas after 10 years of operation, or fewer if necessary.

As far as prices are concerned, the current version of the outline presents two options through which gas companies would be able to negotiate with Israeli consumers, but stresses that the firms would not be able to export gas at prices lower than domestic sales prices. Meanwhile, until a competitive market is achieved, a price ceiling with linkage to market changes – at this point, $5.40 per MMBtu (million British thermal units) – would be enforced.

In response to the cancellation of Wednesday’s votes on the outline, members of the opposition claimed victory on Tuesday.

Opposition leader MK Isaac Herzog described the government’s conduct regarding the gas sector as a “farce” and a “resounding failure.”

“The decision to postpone the discussion on the subject is a pillar in the avalanche of a government that is unable to function, fails in every issue it tries to deal with, and has become a real circus in these days that are the last of its existence,” Herzog said. “This is a big win for numerous activist organizations that have been involved with the gas outline and Knesset members [Shelly] Yacimovich and [Eitan] Cabel, who led the fight.”

For his part, Cabel tweeted that, “Netanyahu folded because we stood against him.” The Zionist Union MK also demanded a new gas outline, with “decent and fair” terms.

Yacimovich, from the same party, also called the decision “a major victory for the public” and called for a new outline that ensures greater transparency, real competition, and stricter price controls.

“I am happy that Netanyahu and Steinitz understood that the outline in its current format not only will not lead to competition, but will also cause a delay in the development of the reservoirs, leaving the government defenseless and without enforcement and regulatory tools against the gas monopoly – seriously harming the economy,” Yacimovich said.

Praise for the vote’s delay did not only come from the opposition. Kulanu faction chairman MK Roy Folkman said that his party welcomes Netanyahu’s decision to postpone the discussion, and called for the adoption of some measures to improve the outline.

Some improvements advocated by Kulanu include an emphasis on the need for an additional gas pipeline, the swift development of the Leviathan reservoir, and the guarantee of a competitive pricing scheme. The party emphasized its own goals in the Knesset to promote reforms, reduce social gaps, and decrease the cost of living in Israel.

“The Kulanu faction is the only coalition faction that provided clear recommendations for the improvement of the outline at the hearing,” Folkman said. “We worked hard to improve the outline on issues of cost and of energy security. We will continue to coordinate with the prime minister to ensure that a proper outline will be promoted for the citizens.”