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The Race for Natural Gas

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Israeli Nat Gas Committee Changes Rules

July 28th 2015

Tamar-gas-drill-ocean

Members of the gas outline hearing committee met with Israeli Prime Minister Benjamin Netanyahu today, only two days before the Prime Minister plans to bring the outline to the government's approval and they told him that changes are needed in the outline. Committee members who ended the public hearing that lasted three weeks asked to launch a new round of talks with the gas companies.

Committee members explained that they think the outline should move forward, but with changes in the price issue and in the issue of reservoir development. The most significant change the committee members demand is the price.  The price that was set in the outline they think is too high and the monitoring mechanism is "too soft." They suggested two possible solutions: either lower the gas price or toughen the monitoring mechanism, so that the price will not rise dramatically in the coming years.

The committee members were also concerned by the Israeli dependency on a single gas pipe – the Tamar gas field pipe. As an answer for this problem, the committee suggested imposing more sanctions on the private companies if those do not develop the Leviathan gas field. An additional possibility that was raised after the hearing was to give more incentives to smaller companies so that they buy and develop the Tanin and the Karish gas fields. Netanyahu will meet the committee members again tonight. Meetings with the companies’ representatives may take place as early as tomorrow in order to promote the changes and bring them to the governments’ approval.

Last week, Israel’s State Comptroller Yosef Shapira published a report harshly criticizing the government’s conduct with regards to natural gas in Israel. “The government’s conduct helped create the gas monopoly,” Shapira stated in the report, describing the outline as “lacking, deficient and unconsolidated”. The report claimed that “a serious market failure” was created as a result of the government conducting negotiations with private developers from a point of weakness, resulting in a small group of companies holding all the natural gas fields in Israel.

The State Comptroller recommended the regulation of gas prices, currently lacking from the gas deal. “The government must ensure that so long as there is a monopoly in the field of natural gas supply, the price of gas will be competitive,” he claimed.


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