At a press conference, Prof. Eytan Sheshinski was asked whether he thought his committee discriminated against Israel's natural gas companies in favor of Egyptian companies. On the contrary, he replied, if the government already has an interest in intervening in competition between gas suppliers, then it must ensure the continued activity of Egypt's East Mediterranean Gas Company (EMG), to prevent the second supplier from gaining too much power in the market.
Until this week, Israel's gas suppliers were in quite poor shape. The Sheshinski committee recommendations, which did not carve out an exception for the Tamar gas field, received the full backing of Prime Minister Benjamin Netanyahu. Yitzhak Tshuva and the other partners in Tamar insisted that without an exemption for Tamar, they could not close financing to develop the gas field.
The Ministry of Finance asserted that this was spin. "After all, we offered them help, and they did not come," said the ministry.
Tshuva's Delek Group Ltd. (TASE: DLEKG) and its partners, Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), Noble Energy Inc. (NYSE: NBL), and Dor Alon Energy Exploration Ltd., responded to the ministry's claim with ridicule. They said that the claim demonstrated the remoteness of the committee members, especially the academics Sheshinksi and National Economics Council chairman Prof. Eugene Kandel, from the oil and gas business world.
Paradoxically, the events in Egypt weaken Tshuva's argument that he cannot close the financing for Tamar. The best example is Israel Electric Corporation (IEC) (TASE: ELEC.B22), which found it very difficult to swallow the higher gas prices that the Tamar partners sought to roll over onto it because of the tax hike on gas fields. Today, after Egypt, IEC will find it much easier to absorb the extra cost.
Tshuva and his partners' position vis-à-vis other customers has also improved immeasurably. Only a few days ago, Tshuva & co. were gnashing their teeth reading the warning letters that Israel Corporation (TASE: ILCO) sent, which said that second part of huge gas supply contract could also go their rival, EMG. Today, after EMG's senior partner Hussain Salem has fled Egypt, it is hard to imagine that anyone at Israel Corp is prepared to seriously talk about the Egyptian option.
Until last week, Delek Group, Noble Energy, and Isramco were saying that customers were switching to EMG, and they were claiming that they had to find alternative markets for Tamar's gas. Today, they are casting covetous eyes at EMG's orders backlog, which total $15 billion.
It is premature to say whether part of these spoils will end up in the hands of EMG's Israeli rivals, but today Tshuva has more than one reason to smile.
Published by Globes [online], Israel business news - www.globes-online.com - on January 31, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011