A final attempt made to reach agreements between the state and the natural gas companies before the compromise structure in the gas industry is presented to the cabinet for approval ended unsuccessfully. Over the past week, the parties held marathon talks aimed at settling outstanding material issues, such as the price of gas and the export quotas. Another meeting took place today, but ended without a breakthrough. The proposed compromise will be brought before the security cabinet on Sunday for approval. Nevertheless, even if the cabinet accepts that a political-security issue is involved that justifies bypassing Antitrust Authority director general Prof. David Gilo, the gas companies have made it clear that they will not be willing to sign an agreement that will not be comprehensive and final.
The gas companies and the state reached agreement last month on a general outline for the structure of the gas industry, six months after Gilo declared that changes should be made in it. The plan includes structural changes, mainly in the Tamar reservoir, with Delek Group Ltd. (TASE: DLEKG) selling its 31% stake in the reservoir to a third party within six years and Noble Energy diluting its current 36% holding to 25%. Delek Group and Noble Energy will also sell their holdings in the Karish and Tanin reservoirs. It was decided not to intervene in the structure of the Leviathan reservoir in order to avoid complicating its development.
There are still substantial unsolved issues, however. One of the most important ones is the price of gas in the future gas contracts to be signed with the companies' customers for the Tamar reservoir. The Ministry of Finance wants to keep the range of gas prices at $4.50-6.50 per MMbtu, or at least to maintain a fixed price of $5.35, which is the price of gas in the Israel Electric Corporation (IEC) (TASE: ELEC.B22) option for the Tamar reservoir. The gas companies oppose this, while they agree to maintain prices at the levels reflected in the contracts already signed by the Tamar partners and their customers. This price stood at $5.44 per MMbtu in 2014.
As a result of the dispute, only the general outline of the compromise will be presented to the cabinet. Several members of the Kandel team that formulated the compromise are saying that the compromise should be approved without a solution of the outstanding issues. They assert that these issues can be settled at a later stage.
Prime Minister and Minister of Foreign Affairs Benjamin Netanyahu, who complimented the compromise formula in a speech at the Herzliya Conference last week, is almost sure to approve it. Minister of National Infrastructure, Energy, and Water Resources Yuval Steinitz and Minister of Public Security Gilad Erdan are also expected to vote in favor. The views of Minister of Justice Ayelet Shaked and Minister of Defense Moshe Ya'alon are unknown. The position of Minister of the Economy Aryeh Deri is also unclear, after he made his vote for approval contingent on allocating some of the gas from the Leviathan reservoir to factories. Deri is also seeking to make sure that the gas price for factories will be set at $4.50 per MMbtu, with a previously determined linkage mechanism.
What about Minister of Finance Moshe Kahlon? He is a cabinet member, but has already said that he will not be involved in any way in the gas sector, due to his ties with Koby Maimon, one of the owners of the Tamar reservoir. Kahlon's office said that the minister was not answering questions concerning the political-security cabinet.
Published by Globes [online], Israel business news - www.globes-online.com - on June 11, 2015
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