Kahlon says gas compromise won’t pass muster, monopolies must be dismantled

Up until now, Kahlon has maintained distance from the natural gas issue, due to his friendship with Koby Maimon, whose company Isramco has a 28.75 percent share in the Tamar gas field.

AUGUST 9, 2015 01:51

Moshe Kahlon (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST) — Moshe Kahlon

(photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)

Emphasizing the need to “dismantle all monopolies,” Finance Minister Moshe Kahlon argued on Saturday night that the controversial natural gas compromise outline cannot pass in its current form.

“In my opinion, there will be changes,” he said, in an interview with Channel 2. “This outline cannot pass.”

During the interview, which was his first in some time, the minister discussed the importance of both breaking apart monopolies and ensuring that either competition or price supervision exists in the gas sector. Up until now, Kahlon has maintained distance from the natural gas issue, due to his friendship with Koby Maimon, whose company Isramco has a 28.75 percent share in the Tamar gas field.

“Israeli citizens deserve better and they should benefit from this resource,” he said.

A cabinet and Knesset vote on the natural gas outline, aimed at settling disputes that have all but frozen the sector, was slated to take place on July 29, prior to the Knesset recess.

However, the night before, National Infrastructure, Energy and Water Minister Yuval Steinitz, in consultation with Prime Minister Benjamin Netanyahu, decided to postpone the vote.

The outline in question is the result of more than half a year of negotiations among government officials and the natural gas companies operating off of Israel’s Mediterranean coast.

The discussions began at the end of 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.”

After negotiations concluded, the National Infrastructure, Energy and Water Ministry released the resultant outline’s terms to the public on June 30.

If no changes are made to the current version of the outline, Delek subsidiaries Delek Drilling and Avner Oil Exploration would need 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% 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.

Members of the opposition have voiced staunch opinions against this version of the outline, particularly demanding stricter price controls and assurances that competition will be created among the companies operating in Israel’s water.

Although he is a member of the coalition, Kahlon expressed the need on Saturday night for similar mechanisms.

“Supervision is something problematic, but if there is no competition, we need supervision," he said.