Cabinet outlines plan for sovereign wealth fund
Fund to invest royalties earned from gas, oil; ministers to vote in coming weeks.
Energy and Water Minister Uzi Landau Photo: Courtesy National Infrastructures Ministry
The cabinet announced its plan Sunday to create a sovereign-wealth fund from
future natural gas and oil royalties which will invest in education, and protect
the country in times of national emergency. Ministers will vote on details of
the plan in the coming weeks.
A committee consisting of officials from
the Prime Minister’s Office, Finance Ministry and Bank of Israel released its
own findings at the cabinet meeting, recommending that around half of the
state’s royalties from gas and oil be deposited into the fund.
committee recommended using the fund to invest in global markets, and allocating
a portion of the profits to government-approved education and defense projects.
It advised that the Bank of Israel manage the fund under treasury supervision,
and be used to provide loans as insurance in the event of war, economic crisis,
natural disaster or other catastrophes.
The Sheskinski Law, which was
approved in April, set the state’s share of the net profit from the sale of oil
and gas at 52.5 percent to 62.5%. The initial levy on companies will reach up to
50%, dependent on the amount of excess profits, while the rate of royalties will
stand at 12.5%.
Leviathan, located about 130 kilometers off the coast of
Haifa, is estimated to contain some 14-20 trillion-cubic feet of gas worth
around $40-50 billion, while experts believe Israel’s total offshore natural-gas
reserves are worth at least $100 billion.
Prime Minister Binyamin
Netanyahu said in his opening remarks at the weekly cabinet meeting that it
would be years before the state reaps the dividends of natural gas finds, but
that when the time finally arrives it will amount to a great deal of
Netanyahu added that he and Energy Water Resources Minister Uzi
Landau examined during a visit to Cyprus last week the possibility of the two
countries developing joint natural-gasexport facilities.
Protection Minister Gilad Erdan argued in response to the committee’s
recommendations that oil and gas royalties should be used to monitor the
drilling process, so that Israel is prepared to deal with potential marine
pollution disasters that could occur as a result of drilling, such as the
enormous oil spill in the Gulf of Mexico in 2010.
“The financial and
environmental damage from the  Carmel fire would pale in comparison to a
pollution incident in the Mediterranean Sea,” Erdan said in a press
“Unfortunately, today we are unable to stand up to such
potential damage. We must use part of the royalty funds toward building
prevention and coping mechanisms for marine pollution incidents, and not allow
them to be swallowed up by the general state budget.”
Also Sunday, Landau
rejected as “against the norms of good governance” a press statement sent by
Netanyahu’s media adviser announcing the appointment of Prime Minister’s Office
Director-General Harel Locker as head of a committee on the natural gas
According to the statement, the committee will examine how to
export natural gas to Asia; promote economic ties with other countries; advance
the supply of natural gas to the domestic-electricity sector; integrate it into
existing industries; and use it to create new industries.
But in a letter
to Netanyahu, Landau wrote that this was the first he heard of such a committee,
and that its establishment ignored the fact that a committee headed by Energy
and Water Resources Ministry Director-General Shaul Tzemach was already
examining the natural-gas sector and was expected to submit its own findings in
the coming weeks.