"A targeted killing" is how Delek Energy chairman Yoram Turbowitz described the Sheshinski committee recommendations today. Talking to "Globes", he talked of the wrong done to the oil and gas industry, and said the Treasury would also lose out. Delek Group hoped until the last minute that the Tamar discovery would be left alone, and that the rise in taxation levels would not apply to it. These hopes were overturned. Not only Tamar, but even Yam Tethys's emptying Mari-B field will be impacted. "A targeted killing has been carried out of an industry in its infancy that could become a mainstay of the Israeli economy," Turbowitz said.
"Instead of working to build a gas industry that will contribute to the people of this country in so many areas of life, they have decided to put the venture in jeopardy to satisfy short-term political needs," says Turbowitz. "It's impossible to understand why Minister of Finance Yuval Steinitz is in such a hurry to promote the sale of Egyptian gas to Israel at the expense of Israeli gas. Israel's dependence on Egyptian gas is not a recipe for anything good. This is a day of mourning for Israeli gas and the people of Israel, and a day of celebration for Egyptian gas and the Egyptians."
The minister of finance said yesterday that there was no connection between Egyptian gas and Israeli gas.
"The Egyptian gas is the whole story. We know the Egyptian government subsidizes Egyptian gas for local consumption. Today we find, to our surprise, that the government of Israel also insists on subsidizing Egyptian gas for Israeli consumption, and is now embarking on a campaign to more than double the subsidy. If you look for logic in this move, you won't find it."
Can you explain?
"I and the Egyptian gas are standing on the starting line and competing for Israeli customers like Israel Electric Corporation, Israel Chemicals, Nesher, and Oil Refineries. Just before the race starts, the minister of finance comes along hangs heavy weights on the Israeli contender. As Steinitz himself said, the burden will rise more than twofold, form 30% to 66%. Now they say to me, run together. So the competitor gets to the customer, and I get to the Ministry of Finance."
Professor Sheshinski sounded more concerned yesterday that you will remain a sole supplier. The claim that Delek's power represents a threat to the competition is heard widely.
"We are in favor of free and fair competition. We know how to deal with competition like that, and we proved it when, for six years, we supplied nearly the entire natural gas needs of the economy at a price far below the global market price, and without supply being disrupted for a moment. And so the economy saved NIS 39 billion on the cost of energy for producing power, and benefitted from substantial falls in electricity and water prices, and improvement in the quality of the environment."
What do you say about the billions that will supposedly flow to the public purse thanks to committee's recommendations.
"These are imaginary amounts of money. They bear no relation to reality. In fact, the Ministry of Finance's plan, if it manages to implement it, will damage state revenues. You have to remember that every dollar of Israeli gas today pays half a dollar back to the government. Every dollar of Egyptian gas sold in Israel doesn't pay anything to the government. People paying their electricity bills in Israel are subsidizing the Egyptians."
Are you on your way to the courts?
"Clearly, as a public company, we will do everything possible to avoid turning to the courts. We will also entreat our American partner, the only international energy company active in Israel, not to turn to international courts. The decision on that is of course solely theirs."
It looks as though Prime Minister Benjamin Netanyahu will have to decide in the dispute that has broken out between the Ministry of finance and the Ministry of National Infrastructures over the Sheshinski recommendations. Minister of National Infrastructures Uzi Landau said today that "We need the approach of a responsible adult and not of someone who takes an extreme view of only one side of the picture." Landau said that the Sheshinski recommendations reflected the norm in many countries, but were inappropriate for Israel's situation.
Senior managers at Delek responded to the recommendations with apocalyptic statements about "the end of the Israeli gas dream." Turbowitz himself is convinced that the committee's recommendations will not be implemented in the end. "They went several bridges too far," he says.
Published by Globes [online], Israel business news - www.globes-online.com - on November 11, 2010
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