The natural gas suppliers will be obligated to offer future gas consumers two different mechanisms for the price of gas and its linkage, "Globes" has learned, in advance of the publication of the gas plan in a public hearing. If customers select neither of the two options, the parties can negotiate a different mechanism.
One of the mechanisms that the gas companies will have to offer is called "The Israeli Father," meaning that the base price of the gas will be the average price in contracts signed in the preceding quarter, linked to the existing basket. Today's average price varies around $5.30 per MMbtu, linked to Brent (25%), the US Consumer Price Index (40%), and the Israel Electric Corporation (IEC) (TASE: ELEC.B22) production component (35%).
The second mechanism that the companies must offer customers is the best Brent contract in the economy. As of now, the gas price in several of the gas contracts with Tamar is fully linked to the global Brent price, with ceiling and floor prices.
The Tamar partners will have to offer new customers the contract with the best terms for the consumer. Beyond that, the gas companies will be able to offer customers in Israel the same terms they offer in their export contracts in order to avoid complicated tax calculations. The Sheshinski Committee decided that tax on gas exports would be on a price no lower than the average gas price in the Israeli economy a clause that would have complicated the Israel Tax Authority's calculations, due to the varying linkages in contracts.
Published by Globes [online], Israel business news - www.globes-online.com - on June 29, 2015
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