The signs are that the final report of the Tzemach committee will make it easier for the gas exploration partnerships in Israel to export gas. This represents a softening of the committee's stance in its interim report.
According to the draft final report of the committee on the structure of the gas economy, headed by Ministery of Energy and Water Resources director-general Shaul Tzemach, the gas partnerships will be allowed to export more than 50% of the gas reserves they control from any large reserve (more than 200 billion cubic meters, such as Tamar and Leviathan). Medium-size reserves (100-200 million cubic meters) will be allowed to export 60%, and small reserves (under 100 million cubic meters) will be allowed to export as much as 75% of their production.
The committee stresses in its report that exports will not come at the expense of security of supply to domestic consumers. "The concept that permitting exports is by way of an alternative to securing the economy's consumers is incorrect. Permitting exports of natural gas does not prevent but rather promotes the security of the local economy's consumers and serves to encourage the development of a local natural gas-based economy."
The committee members also warn against hesitation and postponement of decisions. "Unclear government policy does not enable the developers to make the required decisions and to obtain the vital finance for developing the reserves, and thus generates uncertainty in the entire value chain of the natural gas economy, particularly in exploration and development activity. By way of illustration, postponement of the development of the Leviathan reserve by one year will lead to direct loss of state revenues of $400-700 million, depending on various scenarios."
The draft report also recommends that gas reserves for the purposes of calculating allowed exports should include both proven and unproven reserves, so that the gas partnerships will be able to plan exports of gas from reserves that have not yet been proven as discoveries.
The report will also recommend keeping gas reserves sufficient for domestic purposes for 25 years, arguing that "securing supply for a longer period of time is not economically worthwhile." Exports will be allowed only when Israel has at least 450 billion cubic meters of gas (this amount is to be updated in five years' time).
Published by Globes [online], Israel business news - www.globes-online.com - on August 22, 2012
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