Lapid hedges support for gas plan on price control

Lapid indicated on Saturday night that that is not sufficient regulation for him to support the deal.

By
July 4, 2015 23:07
4 minute read.
Israel's natural gas

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

 
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The coalition will not be able to rely on votes from opposition party Yesh Atid to allow it to pass the government’s gas plan, unless it adds price controls that lower the cost for Israel’s consumers, party chairman Yair Lapid said Saturday.

“If there is no system of price regulation that will let us know, at the end of the day, that this translates into lowering prices for the citizens of Israel, then not only will we not support the plan, but we will oppose it with all our might,” Lapid told Channel 2’s Meet the Press.

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Lapid revealed that he told Energy Minister Yuval Steinitz that there must be price controls on natural gas and the plan should be made transparent, before a procedural vote that would allow the deal to move forward took place as scheduled on Monday.

The coalition canceled the vote, as it was unable to get enough MKs on its side, because three ministers – Finance Minister Moshe Kahlon, Construction Minister Yoav Galant, and Welfare Minister Haim Katz – refused to take part due to financial conflicts of interest, even though the Knesset legal adviser said they could.

On Tuesday, Steinitz made the gas outline available to the public. It gives gas companies two options in negotiating prices. The first would involve a formula that takes into account revenues from gas sales made during the previous quarter, divided by the cumulative amount of natural gas in millions of British Thermal Units (mmBtu), and would be updated at the beginning of each quarter.

The second would be to calculate sales prices based on the best existing consumer contracts in the market, taking into account current prices for benchmark Brent crude oil.

If a company ended up exporting gas at a price that is lower than its sales price in the domestic market, the firms would need to sell its gas in Israel at the lower price.



Until a competitive market is achieved, a price ceiling with linkage to market changes – at this point, $5.40 per mmBtu – would be enforced.

Nevertheless, Lapid indicated on Saturday night that this is not sufficient regulation for him to support the deal.

“If there isn’t a regulation system, then why are they making this deal?” he asked.

At the same time, Lapid said, “I think we can’t delay this anymore. We need to develop the Leviathan field, and in the end that will lower electricity prices.”

The Yesh Atid leader accused the plan’s most adamant critics of wanting to waste another 10 years trying to completely change the system, saying, “that’s religious, not economic behavior.”

In addition, Lapid took credit for convincing the government to reveal the gas plan, just as Economy Minister Arye Deri, opposition leader Isaac Herzog (Zionist Union), and many others did in the last few days.

On Saturday night, after a similar event exactly one week before, activists from the Green Course student movement led a protest against the gas deal at Tel Aviv’s Rabin Square and at other sites around the country.

The activists demanded lower gas prices and increased use of gas in domestic factories, accusing the government of bending to foreign interests.

“The people who walk with me now and took to the streets across the country show that the public has not remained indifferent to the secret natural gas outline that the Netanyahu government has led and that the struggle is intensifying,” said Mor Gilboa, CEO of Green Course.

“We are waiting for the Israeli government to change its decision for the benefit of all and for the benefit of our children and grandchildren who will live here in the coming decades.”

Under the government’s gas outline, Delek subsidiaries Delek Drilling and Avner Oil Exploration would have to exit the 282-b.cu.m.

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, needing 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. Because the buyer would be required to sell gas only to Israel, export allocations intended for these reservoirs would be transferred to Leviathan, according to the outline.

In 2013, the cabinet decided to cap exports at 40% of production, and pipelines designated for export will not be entitled to tax benefits guaranteed to local pipelines, as mandated by the Sheshinski Committee, whose recommendations on hydrocarbon taxation became law in 2013.

Although the outline’s terms have been published, bringing the document to the cabinet for approval still faces a hurdle that the government had expected to overcome on Monday. The cabinet had intended to prevent Antitrust Commissioner David Gilo from interfering in the agreement, on national security grounds. Gilo has made clear he would not support the outline and went so far as to announce on May 26 his resignation, effective in August.

Economy Ministry Arye Deri declined to exercise his authority to circumvent Gilo’s objections, but transferring his powers to the full cabinet requires both cabinet and Knesset authorization, while the government succeeded in getting only the first.

It remains unclear when a new Knesset vote on the matter will take place. The gas plan itself does not need to be approved by the Knesset.

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