Panel votes down bill to supervise natural gas prices

MK Braverman vows to bring bill to Knesset; industry stakeholders hail rejection.

November 23, 2014 19:09
4 minute read.
Avishay Braverman

Avishay Braverman. (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)

The Ministerial Committee for Legislation rejected on Sunday a bill proposed by MK Avishay Braverman (Labor), which called for government supervision of natural gas prices.

The bill, which aimed to amend the 2002 Natural Gas Law, stipulated that “ministers would determine by decree the maximum price for natural gas.” Within the existing law, a paragraph would have been added indicating that such price supervision must occur due to the lack of competition or lack of sufficient competition in the natural gas supply sector.

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Despite the bill’s widespread support across the political spectrum – accruing 34 signatures from Knesset members in most parties – the ministers voted the proposal down “nearly unanimously,” the Ministerial Committee for Legislation reported.

“The government tells its citizens that it is working to lower the cost of living, but in fact rejects the only and obvious solution that could influence the market and industry and save billions,” Braverman said in response to the decision.

In the bill’s explanatory notes, the text argued that as a natural resource, gas has a significant impact on the economy and on the cost of living. Today’s natural gas market, however, is dominated by a single monopoly, resulting in a situation in which competitive prices are not being offered to consumers, the bill said. If a monopoly controls the market, the government must monitor prices, the proposal added.

According to the law, the ministers of finance and national infrastructures, energy and water are allowed to set the maximum price for natural gas, with the recommendation of a pricing committee – as per the Price-Control Law, established in 1996, the bill explained. Had the legislation passed, it would have required those ministers to do so, within 45 days of the passing of the proposed law.

“Lowering the price of gas could jump-start industry in the sector and truly combat the cost of living, and not only the price of Milky,” Braverman said, referring to the popular Israeli chocolate pudding, which recently sparked controversy due to its far higher cost at home than its equivalent Germany.

“If the government does not pull itself together quickly it will sacrifice the livelihoods of citizens in favor of the gas monopoly for the next 30 years,” he continued. “In the next quarter, I intend to bring the bill to a vote in the Knesset plenary and give another chance to other MKs on such an important decision that the economy needs.”

In an exclusive interview with The Jerusalem Post two weeks ago, Braverman had argued that the price the Israel Electric Corporation was currently paying for natural gas – about $5.6 per mmBtu (1 million British thermal units, the unit typically used around the globe to describe natural gas prices) – was far too high. Citing economic reports, he determined that a price would be between $3 and $3.50 per mmBtu, to fully compensate and provide a competitive rate of return for the producers, as well as make gas affordable to Israeli consumers.

Although Braverman identified the partners developing the Tamar and Leviathan reservoir as a monopoly, he did not argue that these partners should be dismantled.

Rather, he said he hoped to achieve a competitive price for consumers.

Braverman submitted the bill to the Ministerial Committee for Legislation with the support of 33 other MKs from a wide range of political parties: 12 from the Labor Party, one from Bayit Yehudi, two from Likud, one from Yisrael Beytenu, one from Hatnua, four from Shas, three from Hadash, one from Balad, three from Meretz, three from United Torah Judaism, and two from United Arab List- Ta’al.

Nonetheless, nearly all of the members of the Ministerial Committee – which includes the ministers of justice, finance, construction, health, agriculture, interior, communications, sports, senior citizens, public security, intelligence, immigrant absorption and science – voted against the bill’s passage.

While a spokesman for the committee confirmed that the vote to reject the bill was “almost unanimous,” he said there is no record as to who precisely voted in favor and who against.

Stakeholders in the country’s natural gas sector hailed the rejection as a positive advancement for continued development of the country’s hydrocarbon reservoirs.

“This was one of the final obstacles in the development of the Leviathan gas field,” industry sources told the Post on Sunday evening.

The 621-billion-cubic-meter Leviathan reservoir is expected to begin flowing in early 2018, reservoir partner Delek Drilling announced last week in the company’s third-quarter financial report.

In addition to Delek Drilling – which owns 22.67 percent of the basin – another Delek Group subsidiary, Avner Oil Exploration, also holds 22.67% of the reservoir, while Houston-based Noble Energy owns 39.66% and Ratio Oil Exploration has a 15% stake. The Delek Group subsidiaries and Noble Energy are also the primary partners in the neighboring Tamar reservoir, which began flowing in March 2013.

Development of the Leviathan basin, which will be used for both domestic and export purposes, has been delayed due to numerous bureaucratic challenges.

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