Report: Committee members recommending stricter price supervision in gas outline

Committee members are reportedly supporting expedited development of the Leviathan reservoir.

July 27, 2015 22:38
2 minute read.
Israel's natural gas

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


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Just two days before the controversial natural gas outline is slated to head to the cabinet for approval, the document’s public hearing committee has said changes are needed in the price structure, among other elements, Channel 2 reported Monday night.

Members of the committee, who held a public hearing regarding the terms of the outline last Wednesday and Thursday, are recommending lowering the price ceiling advocated in the original document and are describing the current price supervision scheme as “too soft,” Channel 2 said.

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In addition, the committee members reportedly are supporting expedited development of the Leviathan reservoir; construction of an additional gas pipeline; and renewed negotiations with the gas companies – discussions that have already been taking place for the past seven months.

Disputes have essentially frozen the country’s natural gas sector since December, when Antitrust Commissioner David Gilo announced that he would review whether the market dominance of the Delek Group and Noble Energy constituted an illegal “restrictive agreement.” A series of negotiations among the gas companies and government officials followed, leading the National Infrastructure, Energy and Water Ministry to release terms of a compromise outline to the public on June 30.

Members of the public then had three weeks to submit their reactions, after which a hearing took place last Wednesday and Thursday.

Also last week, just two days before the public hearing, State Comptroller Joseph Shapira issued a report slamming the country’s various regulators for failing to coordinate natural gas policy. Shapira stressed that their behavior has led to a situation in which Israel has only one gas supplier, one gas pipeline, no backup storage and no new development on the horizon.

The state comptroller discussed the need for gas price supervision, demanding that the government evaluate a variety of means to ensure a competitive market.

If the current version of the gas outline does go on to receive approval, Delek subsidiaries Delek Drilling and Avner Oil Exploration would need to exit the 282 Tamar reservoir, whose gas began flowing to Israel in March 2013, selling their assets there within six years. Houston- based Noble Energy could remain the basin’s operator, but would need to dilute its ownership from the current 36 percent share to 25% within the same time frame.

The Delek subsidiaries and Noble Energy would need to sell their holdings in two much smaller offshore reservoirs, Karish and Tanin, within 14 months.

With regard to the Leviathan reservoir, the companies would be able to remain without any change in ownership. The government would reserve the right, however, to require separate marketing of gas after 10 years of operation, or fewer if necessary.

As far as prices are concerned, the current version of the outline presents two options through which gas companies would be able to negotiate with Israeli consumers, but stresses that the firms would not be able to export gas at prices lower than domestic sales prices. Meanwhile, until a competitive market is achieved, a price ceiling with linkage to market changes – at this point, $5.40 per mmBtu (million British thermal units) – would be enforced.

The public hearing committee members are arguing that this price control scheme is too lax and must be adjusted, the Channel 2 report said.

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