Antitrust chief seeks 'structural remedy' on gas market

Antitrust commissioner says considering whether majority ownership of Leviathan constitutes a "restrictive agreement."

January 13, 2015 20:11
2 minute read.
Israel's natural gas

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


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Israel Antitrust Authority Director General David Gilo on Tuesday said he was seeking a structural solution for the natural gas market.

“We are currently seeking, in the case of the natural gas market and subject to the hearings, a structural remedy that will create real competition in the natural gas market,” he said at the annual IAA conference in Tel Aviv.

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Gilo differentiated between a structural solution, which would imply introducing more competition into the market, and a behavioral solution, which implied using regulation such as price controls to keep Delek Group and Noble Energy – the two main investors in the Tamar and Leviathan basins – in check.

On December 23, Gilo announced that he would be reconsidering the status of the two companies in the Leviathan basin. He had determined that a proposed consent decree regarding the entry of the Delek Group and Noble Energy into Leviathan would not be submitted to the Antitrust Tribunal for approval as had been agreed upon earlier this year.

The proposed decree would have allowed the companies to sell their shares in two smaller reservoirs, Tanin and Karish, in order to remain in Leviathan without receiving the status of cartel.

The antitrust commissioner said he would be considering whether their majority ownership of Leviathan constitutes a “restrictive agreement,” also defined as a cartel, which is illegal in Israel.

“The foundations of this structural remedy are an alleged restraint of trade, which led to a monopoly. This is not a case of intervention against a monopoly just because it is a monopoly, but rather against a monopoly that was created as a result of an alleged restraint of trade between the parties,” he explained on Monday.

Gilo said the natural gas market was an “exceptional” case, in part because it affected such a large part of the country’s economy and in part because it has no precedent.

Knesset members from across the political spectrum have applauded Gilo’s step as a positive move for the public and the introduction of competition.

Nonetheless, foreign investors have warned of their increasing reluctance to participate in Israel’s hydrocarbon industry as a result of the uncertainty associated with the sector.

Less than two weeks ago, a Jordanian parliament member warned that discussions regarding the import of Israeli gas would be temporarily suspended, as a direct result of this instability.

At the end of November, Delek Drilling reported that Leviathan was expected to begin flowing by the beginning of 2018. Several preliminary export deals, meanwhile, have already been signed with both private and public entities in the region.

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