Timing of gas report irrelevant, says consultant

By
July 21, 2015 02:47

The government’s conduct without a coherent policy, no long-term plan, without cooperation among regulations is what created the monopoly and led to the current situation.




Israel's natural gas

Israel's natural gas. (photo credit: MINISTRY OF NATIONAL INFRASTRUCTURES)

State Comptroller Joseph Shapira’s Monday report tearing into the politics of the natural gas sector was a “Hail Mary pass” to change the way policy is made. The question remains whether the report, which reaffirmed widely recognized deficiencies in the industry’s development, could actually make a substantial difference.

Shapira lambasted the failure of the country’s various regulators to coordinate natural gas policy, which has led to a situation in which Israel has only one gas supplier, one gas pipeline, no backup storage, and no new development in sight. The state comptroller also stressed the need for gas price supervision, demanding that the government evaluate a variety of means to ensure a competitive market.

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While gas industry professionals, as well as politicians, largely corroborated Shapira’s points, the document’s ability to influence forthcoming policy decisions is up in the air. The latest decision on the horizon will be the cabinet’s approval – or lack thereof – of a compromise outline formulated by government officials and the country’s natural gas companies, which aims to bring seven months of disputes to a close.

While the gas sector has been turbulent for years, the most recent disagreements are the result of Antitrust Commissioner David Gilo’s December announcement that he would review whether the market dominance of the Delek Group and Noble Energy constituted an illegal “restrictive agreement.” The industry’s development has been largely frozen since then, as the parties negotiated over the terms of the outline, published by the National Infrastructure, Energy and Water Ministry on June 30.

The terms of the outline are available for public review until Tuesday, after which Energy Ministry professionals plan to conduct a hearing. Just days before these hearings, Shapira published his own report delving into the mismanagement of the sector, largely targeting the Energy Ministry as the responsible party.

Miki Korner, a private energy consultant and former chief economist for the Natural Gas Authority, called Shapira’s findings important, but described the timing of the report’s publication as simply “irrelevant.”

“I think it’s like the kids shouting, ‘I want to join the party also. Please don’t forget me,’” Korner told The Jerusalem Post on Monday.

Acknowledging that the government did operate too slowly and failed to provide sufficient professional human resources toward advancing the gas sector, Korner explained of Shapira’s report that, “It’s all true, but it’s not urgent. It has nothing to do with the [current] debate.”

Dr. Amit Mor, CEO of the Eco Energy Financial and Strategic Consulting firm, said he feels that Shapira’s publication “is a very important report,” though he is uncertain “how it can affect the policy issues about the natural gas development schemes.”

Regarding price supervision, Mor voiced his support for the mechanism proposed in the compromise outline, in which a price ceiling with linkage to market changes would be enforced until competition is achieved.

Mor focuses on the issue of national security – particularly the need for additional gas pipeline entry points, should a strategic threat or technical glitch threaten Israel’s sole functioning Tamar reservoir.

“We would sleep in the dark, both the Israelis and the Palestinians,” he said.

Mor explained that a month-long shortage of just 10 percent of the electricity supply could amount to some $12.5 billion in economic damage.

Stressing the importance of the report, Mor said that Shapira is contributing to the ongoing discussion as well as providing “the right criticism about the wrong governances in the past few years.”

Nonetheless, like Korner, Mor acknowledged that by issuing the report, the state comptroller is “riding on the wave” currently sweeping through the sector.

While Korner also supported the majority of points made by Shapira in the report, he identified a few government failures that were sorely missing from the 66 pages of criticism.

Entirely unmentioned was the breakdown of negotiations that would have brought in another player – a competitor – into the Israeli gas market, Korner explained. In May 2014, Australian hydrocarbon firm Woodside Petroleum withdrew from a projected $2.71b. deal to acquire 25% of the Leviathan basin due to disagreements with the country’s Tax Authority.

Criticizing Shapira for insufficiently censuring the antitrust commissioner in the report, Korner questioned whether Gilo’s December declaration was justified and described the toll the resulting development freeze took on the market. He voiced his support, however, for the comptroller’s statement that the gas companies should not be viewed as the enemy, as they have an important role to play in building Israel’s energy future.

Gilo defended his December decision, stressing that the announcement followed extensive work that analyzed arguments made in public hearings and other assembled data, and stated that, “the gas market is most complex market”.

The Likud Party, meanwhile, praised the state comptroller’s report, adding that its text “reinforces the work that we did on the outline and enables ‘one outline for one people.’” The gas companies issued a joint response to the state comptroller’s report, saying that the document “strengthens and proves statements made by the gas partnership along the way.” The companies described the many, uncoordinated regulators, the years of delays prior to decisions, the frequent changes in those made, and the subsequent uncertainty generated in the market.

In the opposition, MK Shelly Yachimovich (Zionist Union) had a drastically different analysis of the report’s significance, arguing that the document “mandates the immediate and urgent cancellation of the gas outline.”

“The state comptroller’s report is another nail in the coffin of the gas outline, which is born from sin, some of which the comptroller described,” she said.

Economic Affairs Committee chairman Eitan Cabel (Zionist Union) meanwhile submitted a motion for the establishment of a parliamentary investigative committee on Monday to look into the “lawlessness” surrounding the country’s gas sector.

State Control Committee chairwoman Karin Elharar (Yesh Atid) plans to hold a session on Tuesday to discuss the report.

“The government’s conduct without a coherent policy, no long-term plan, without cooperation among regulations is what created the monopoly and led to the current situation in which the whole process is done remotely, in the dark, and without the participation of the public,” she said.


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