Steinitz: Gas outline to be fully activated, in place by the new year

By
November 17, 2015 11:06

Legal clause to unfreeze gas program to be activated by new Minister of the Economy, Benjamin Netanyahu.

4 minute read.



Israel’s natural gas

Israel’s natural gas. (photo credit:MARC ISRAEL SELLEM/THE JERUSALEM POST)

Bringing an end to a nearly yearlong freeze in the natural gas sector, the country’s disputed natural gas compromise outline will be fully implemented by the new year, National Infrastructure, Energy and Water Minister Yuval Steinitz said Tuesday.

Although the deal received both required cabinet authorization in August and additional Knesset backing in September, activating the outline still demands that the economy minister invoke a legal clause to circumvent the objections of the antitrust commissioner. Following former economy minister Arye Deri’s resignation from his position two weeks ago, it is Prime Minister Benjamin Netanyahu’s responsibility as economy minister to consult in the next few weeks with the Knesset Economic Affairs Committee prior to activating that clause – known as Article 52.

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These consultations will take place over the coming weeks, and should not require more than a few meetings, Steinitz confirmed Tuesday, during his address at the Universal Oil & Gas Conference and Exhibition in Tel Aviv.

“I believe that by the beginning or middle of December this will be over, and by 2016 we will be open, with the gas framework already activated and fully in place,” the energy minister said.

Following the December announcement of former antitrust commissioner David Gilo that he intended to review whether the market dominance of Delek Group and Noble Energy constituted an illegal “restrictive agreement,” nearly eight months of negotiations among the companies and government officials ensued.

After issuing several iterations of a compromise outline and following a public objections period, the cabinet authorized the terms of the deal in August. While Knesset support is not required to pass such an arrangement, the legislature narrowly voted to approve the document the next month.

Yet Gilo – who resigned over the issue and completed his term on August 31 – refused to support the outline, saying it would stifle competition in the gas market. To bypass such a refusal, the economy minister can invoke Article 52 of the 1988 Restrictive Trade Practices Law (The Antitrust Law), citing national security interests.

Nonetheless, Deri was not willing to invoke Article 52, arguing that the clause had never been implemented in the country’s history. He therefore requested that his authority be transferred to the entire cabinet, but the coalition was unable to acquire the necessary majority to approve such a transfer.

Once Netanyahu invokes Article 52 and the gas framework is fully cemented, Steinitz explained that several events will occur. Among the first steps will be the sale of the small natural gas reservoirs Karish and Tanin, a transaction that Delek and Noble are required by the outline to conclude within 14 months. Later will come the sale of assets in the Tamar reservoir, which Delek must exit entirely within six years and where Noble must dilute its holdings but can remain the basin’s operator.

Also critical following the activation of the outline will be the rapid development of the Leviathan reservoir, Steinitz added.

“My intention as minister of energy is to reopen our economic waters for other exploration and investigation,” the minister said. “According to the data that we have, our own evaluation and also some very research that we ordered from international advisers, we believe that it’s very likely that other significant gas and oil fields are still waiting to be discovered in our economic waters.”

Steinitz also emphasized the importance of working together with Israel’s neighbors – particularly Egypt and Cyprus – to focus on their collective opportunities as regional gas developers.

“It’s very clear to all the three countries that we are talking about the eastern Mediterranean basin under the assumption that some significant gas fields will be discovered in the next few years,” he said.

Bini Zomer, Noble Energy’s Israel country manager, praised both Steinitz and Netanyahu for their work to advance the gas outline, stressing that the companies have lacked “a champion for the industry.” Such a champion, he contended, also works in favor “of the citizens of Israel and the power sector here.”

“Every dollar we invest in Israel competes with a dollar we have to invest somewhere else,” Zomer said. “Sometimes the regulators, or the politicians, deal in a political economy.

And a political economy doesn’t always match up with the actual economy of the oil and gas industry.”

Unlike in the US, where governors and congress members work on behalf of a geographical constituency and are eager to support industry due to the resultant jobs generated for voters, Israeli politicians have little compelling them to provide such backing, according to Zomer. Israelis can actually benefit economically much more from seeing more of their factories connected to natural gas, rather than instituting price controls on gas production, he argued.

“For the first time since I’ve been in Israel, we have a minister that is both committed and willing to step up and advocate for the industry and what it means for the citizen of Israel,” Zomer said.

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