Energy Ministry expects to accumulate NIS 705m. in natural resource royalties this year

Income will enable increased investments in education, welfare and reduce cost of living, says energy and water minister.

Beit Hazikuk in Haifa is the country’s largest oil refinery. (photo credit: Wikimedia Commons)
Beit Hazikuk in Haifa is the country’s largest oil refinery.
(photo credit: Wikimedia Commons)
Royalties paid to the State of Israel from hydrocarbon production increased by 51 percent in the first half of 2014, in comparison to the same period in 2013, the National Infrastructures, Energy and Water Ministry announced on Sunday.
While combined royalties from gas, oil and mineral for 2014 already climbed to NIS 305 million by summer, these sums will likely reach NIS 705m. by the end of the year, the ministry said. Energy Ministry officials largely attribute the jump in royalty payments due to the March 2013 connection of the Tamar natural gas reservoir.
“The sharp rise in royalty revenues from gas, oil and minerals, and the expected continued increase in royalties in the future as well is groundbreaking news for the Israeli economy,” said National Infrastructures, Energy and Water Minister Silvan Shalom. “This income will enrich the state’s coffers, will enable increased investments in education and welfare and will help reduce the cost of living.”
Of the NIS 305m. in royalties collected for natural resource production thus far in 2014, NIS 292m. came from gas generation in the Tamar and Yam Tethys reservoirs, while NIS 5m. came from oil, the ministry said.
As far as other natural resources are concerned, royalties from phosphate mining for the first half of 2014 amounted to NIS 4.5m., according to the ministry.
While gas royalties may have risen dramatically, mineral royalties decreased in comparison to last year, due to a decrease in the price of phosphate globally and a decrease in the dollar exchange rate, the ministry explained.
In addition to these royalty amounts, the state accumulated revenues worth about NIS 3m. from various other fees and activities.
The increase in royalty revenues is expected to rise during the second half of 2014, as well as in the coming years, particularly following the development of the larger Leviathan gas reservoir and other fields, the ministry said.
Gas and oil royalty rates are a steady 12.5%, as determined by the first Sheshinski Committee and approved by the Knesset in March 2011. Legislation determined that profit levies, meanwhile, would stand at 20%, enabling them to eventually rise to 60%.
As far as other natural resources are concerned, the Sheshinski 2 Committee – also led by Prof. Eytan Sheshinski – has recommended imposing a surtax of 42% on excess profits, as well as a 5% royalty rate. These interim recommendations have yet to be finalized, however, and have faced criticism from both the resource exploiters and environmentalists.
The Energy Ministry stressed that the Sheshinski 2 Committee interim recommendations include a proposal to coordinate all natural resource royalty collection under one government authority. At the moment, the collection of royalties is scattered among the Energy Ministry, the Economy Ministry and the Israel Lands Authority. Energy Ministry officials stressed that their accounting and economics administration has both the expertise and experience to be that authority.