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Time to let Israel’s gas flow

In August 2012, an inter-ministerial committee published recommendations (the Zemah Report) about Israel’s natural gas policy. The report’s conclusions were based, inter alia, on the testimony and recommendations of dozens of NGOs, corporations and government agencies.

The Zemah Report insisted that “the rationale for setting a clear government policy as quickly as possible is to create certainty for lease holders and licensees and to provide an incentive for them to develop the gas fields, so as to ensure the supply of gas required for domestic market obligations.” Claiming that “the perception that allowing exports of natural gas comes at the expense of guaranteeing the economy’s needs is not correct,” the report recommended “promoting the exports of Israeli natural gas intended for consumption of neighboring countries as of the utmost importance.”

While the Israeli government endorsed the recommendations in June 2013, Israel’s antitrust regulator, Prof. David Gilo, decreed that the consortium that operates the Tamar and Leviathan offshore gas fields constitutes a monopoly and therefore blocked implementation of the government’s policy. By doing so, Gilo affected Israel’s economic growth, the government’s revenues, and the country’s credibility (as both the Brookings Institution and Standards & Poor’s warned after Gilo’s decision).
Based on Gilo’s decision, however, the government negotiated a new deal with the Israeli Delek Group and with Texas-based Noble Energy: both will have to sell the two smaller gas fields of Karish and Tanin within 14 months, while Delek will sell its entire stake in Tamar in six years and Noble will reduce its stake to 25%. They will still own and exploit Leviathan, a much bigger field due to operate by 2020. The government will also ensure that the price of gas in Israel will not be higher than that of exported gas, and it may ease the limit on the amount of gas that can be exported. This offer was not good enough for Gilo, however, who resigned a couple of weeks ago.

By law, the economy minister is entitled to overrule the antitrust regulator if he considers that doing so is vital to the national interest. But the current office holder, Aryeh Deri, got cold feet and refused to exercise his authority. Deri claimed that he was not sufficiently knowledgeable about energy policy (he made no such claim when he was appointed economy minister), but the true reason for his decision was fear of the media. The Israeli left is up in arms against the new gas deal proposed by the government (with The Marker, Haaretz’s economy supplement, leading the media campaign). There is a pending petition in the High Court of Justice against Deri’s appointment as minister (because of his past prison sentence) and having already spent two years in jail, Deri knows better than to get the media and the judicial system on his case.


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