The absence of a policy in distributing offshore licenses and in development of small gas fields, delays in operating a gas storage reservoir, inadequate environmental regulations for the gas industry, the lack of a policy concerning taxation of gas exports and price controls, and delay in issuing regulations on gas royalties - these are only some part of the faults cited by State Comptroller Joseph Shapira in his report, "Development of the Natural Gas Sector," released for publication today.
According to the State Comptroller, the conduct of all branches of the government in natural gas in recent years was deficient, incoherent, kept investors away, contributed to the formation of the gas monopoly, and in the end harmed the consumers' interests.
The State Comptroller stated that the result of all this was that the Kandel team conducted negotiations with the gas companies from a position of weakness. He therefore recommends adding price controls and enforcement mechanisms to the plan for the gas industry.
The Office of the State Comptroller conducted its evaluation from July 2014 until June 2015 of the actions of the Ministries of National Infrastructure, Energy, and Water and the Economy and the Antitrust Authority in the natural gas sector. Supplementary checks were conducted at the National Economic Council, the National Security Council in the Prime Minister's Office, the Ministry of Justice, the Ministry of Finance budget department, the Civil Service Commission, the Public Utilities Authority (Electricity), the Ministry of the Environment, the Ministry of the Economy Industrial Cooperation Authority, the Israel Natural Gas Lines Company, and the Council for Higher Education.
The State Comptroller determined that the state's policy led to the formation of a gas monopoly, and blamed all the government ministries: "The findings indicate the absence of an overall complete government policy, lack of effective action, a slow pace of activity, and regulation that was either incomplete or totally absent in many areas," Shapira wrote, adding, "In many areas, these deficiencies created friction among the regulators themselves, and between them and the gas rights holders. All these factors caused delays in the development of the gas sector, and are liable to prevent the state from realizing the fully potential of the resource" and "led to the formation of a gas monopoly."
The State Comptroller asserts that the lack of regulation in the sector kept away potential investors, and cites examples of this throughout his report. For example, the Israel Petroleum Law (the main law dictating regulation of oil operations in Israel) includes many topics involving legal uncertainty concerning exploration and production. "There are lacunas in the law, two much room for exercising judgment, and explanations with multiple possible interpretations. It is not up to date, and there are therefore no clear ways for the regulator and the investors to act." The legislative process for taxing exports, for example, has also not been completed, "increasing the uncertainty among potential investors, and it cannot be ruled out that this had a negative impact on the state's image in this important question."
In addition to his criticism of the government agencies involved in the issue, Shapira also severely criticized Antitrust Authority director general Prof. David Gilo.
Published by Globes [online], Israel business news - www.globes-online.com - on July 20, 2015
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