Laying out the conditions in which he would consider exempting the antitrust commissioner from a forthcoming gas agreement, Economy Minister Arye Deri warned on Monday night that he does not intend to simply provide a “rubber stamp” on the divisive issue.
The signing of an deal among government officials and the country’s natural gas companies, slated to occur Thursday in the Security Cabinet, is contingent upon Deri’s willingness to activate Article 52 of the Antitrust Law, in which an economy minister can revoke the antitrust commissioner’s authority over a “restrictive agreement” due to reasons of foreign policy or security.
In a letter to Prime Minister Benjamin Netanyahu on Monday night, Deri expressed his concerns about rushing into activating such as article, as the clause has never been used in Israel’s history and because the Economy Ministry has participated directly in the natural gas deal.
“I do not intend to be used as a rubber stamp, and even if I do end up exercising my authority, I will do so only after delving into the details and hearing the stances and opinions of Knesset members and the general public,” Deri wrote.
Israel’s natural gas sector – and particularly the development of the Leviathan reservoir – has faced a stalemate since December, after Antitrust Commissioner David Gilo said he would review whether the dominance of the Delek Group and Noble Energy constitutes an illegal “restrictive agreement.”
Although gas from the 282-billion cubic meter Tamar reservoir, located about 80 km. off the coast of Haifa, has been flowing into Israel since March 2013, development of its neighboring 621-b.cu.m. Leviathan basin has been unable to proceed as a result of disagreements among government officials and the companies.
Aiming to bring an end to months of disputes and the development freeze, an interministerial team – from the Finance Ministry, the National Economic Council and the National Infrastructure, Energy and Water Ministry – presented the Delek Group and Noble Energy with an initial compromise outline on May 6. While government officials said that companies responded favorably at the time, Gilo announced on May 25 his forthcoming August resignation due to his divergence with the other officials on the outline’s terms.
The most recent version of the proposed compromise outline would require that the Delek Group’s subsidiaries Delek Drilling and Avner Oil Exploration exit the Tamar reservoir entirely, selling their assets there within six years. Houston-based Noble Energy would only need to dilute its assets from its 36-percent share today to 25%, and could remain the basin’s operator.
Both companies would be required to sell their holdings in two much smaller offshore reservoirs, Karish and Tanin.
Unlike the previous draft of the compromise outline, which Gilo had supported, this version revoked a mandate that all of Leviathan shareholders market their gas to the Israeli market separately and posed weaker restrictions on Noble in Tamar.
In Deri’s letter to Netanyahu on Monday night, among the conditions that the economy minister demanded was the swift sale of both Karish and Tanin, in order to guarantee the quick entrance of new competition. The sale should ideally occur within a year and two months, with four more under the management of a trustee, he wrote.
In addition, the timetable in which Delek must sell its assets and in which Noble Energy must dilute its holdings in Tamar must be meticulously defined, according to Deri. He called the six-year period “reasonable,” noting that another year under the management of a trustee is also suitable.
“Beyond this, it will be difficult to create competition,” he said.
As far as the development of Karish and Tanin is concerned, Deri stressed the importance of ensuring that the reservoirs will actually have customers, by potentially reserving gas quotas for these basins and taking other measures.
In developing the Leviathan reservoir, a strict timetable for simultaneously building an additional gas intake pipeline is also crucial, in order to reduce the market’s current dependency on one such pipeline, Deri wrote. As far as the issue of marketing gas separately from Leviathan is concerned, the economy minister said that the government should reserve the option to mandate such a requirement after 10 years.
“If in another 10 years we see that there is sufficient competition in the industry, then we can allow the companies to continue marketing jointly, but there must be an examination showing that competition has developed in the industry,” Deri added.
The economy minister also called for the continued connection of factories to natural gas supplies, accompanied by joint solutions from the finance and economy ministries as to how to reduce the bureaucratic burden involved with doing so.
Lastly, Deri stressed that the price of natural gas must be “reasonable and matching global norms,” with a secure and certain gas market that attracts companies.
“Price stability will be preserved and will not rise unreasonably,” he said.
Reminding the prime minister that the government is now finalizing a gas agreement that will have impact for years to come, Deri emphasized the need to ensure that competition and benefits to the consumer are preserved.
“Without an adequate response to all of these points, it is not my intention to begin the process of activating Article 52,” Deri added.