Landau: Gov’t needs to secure proper electricity supply

New gas tax may threaten Tamar development.

November 14, 2010 22:19
4 minute read.

Uzi Landau top1. (photo credit: KKL)

National Infrastructures Minister Uzi Landau on Sunday called upon the government to ensure the timely development of the Tamar offshore gas field, in an effort to secure the country’s electricity supply and energy independence.

“The most important issue is to protect and ensure the development of the Tamar offshore gas field according to the set timetable. The project has already been delayed by the uncertainty regarding the proposed changes to gas royalties and taxes,” Landau said.

“If the investment in the Tamar field is not attractive and profitable for investors, there will be no project. A failure to secure a timely supply of gas is threatening proper electricity supply to the country.

It is the government’s responsibility to secure proper supply of gas to Israel and therefore the draft recommendations on the royalties from natural resources need to be adjusted in a way that will benefit the public and take into account broader considerations such as geopolitical and strategic interests as well as the question of energy independence and gas exports.”

Landau laid out the position of the ministry in response to Wednesday’s publication of the interim recommendations of the Sheshinski Committee, which proposed to levy a special progressive tax on the profits of gas and oil exploration partnership companies, while leaving the gas royalty rate at 12.5 percent and canceling the depletion allowance.

The committee estimates that if the recommendations are fully implemented, the government take of proceeds from large gas and oil fields will be boosted to 66% from the current 30%.

“There is much talk about tycoons making a lot of money but at the end of the day we have to be attractive to investors, in particular foreign enterprises, so that the public will be able to make a profit,” Landau said. “We need to be attractive as much as other places so that we are chosen over Arab oil countries.”

Separately, the Israel Securities Authority on Sunday published a research study on the heightened stock market activity of gas and oil exploration companies, while calling for clearer and more comprehensive reporting rules.

“There is a rapid surge in market caps and volatility alongside a disproportionate rise in trading volumes. High volatility in this market is sometimes triggered by rumors, making it hard for the investor public to evaluate information and examine the real value of the stock,” Gitit Gur-Gershgoren, head of the economics and research division at the Israel Securities Authority, said at a press conference in Tel Aviv.

“Furthermore, the risk in this sector is very high while the information is very technical and hard to understand for the general public. In light of the very unique characteristics of this sector, we have found it necessary to formulate new reporting rules for gas and oil exploration companies, which will make necessary information more accessible and clearer so that the general public will be able to make balanced decisions about their investment.”

Gur-Gershgoren declined to provide more information on the rules and what type and extent of information they will provide but added that the new rules will be presented over the next few weeks.

The Israel Securities Authority hopes they will come into effect before 2011.

At the press conference, Gur- Gershgoren, presented research on the stock market activity of the gas and oil exploration sector, which has been booming over the past two years against the background of potentially huge gas finds at the Tamar field and the Leviathan gas site, both 90 kilometers offshore from Haifa.

The research showed that the aggregate market cap of the gas and oil exploration companies listed on the Tel Aviv Stock Exchange jumped from NIS 5 billion in 2008 to NIS 39.8b. in October 2010.

Monthly trading volume of gas and oil exploration companies in the first 10 months of 2010 amounted to NIS 7b.

and reached a peak in September representing 30% of total turnover on the TASE. Average daily turnover volume of the gas and oil exploration partnership companies surged rapidly since the beginning of the year, reaching a record of NIS 450 million compared with a high of NIS 150m. in 2009. In addition, oil and gas exploration partnership companies raised NIS 985m. so far this year compared with NIS 619m. for all of last year.

Despite the sharp increase in the market cap and trading volume in the sector, the proportion of holdings of institutional investors in the shares of gas and oil exploration companies has declined.

Investment institutions’ holdings dropped from a peak of 10.75% in December 2009 to 8.81% in June this year.

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