"The challenge we're faced with is maximum of development of the natural gas reservoirs. All those who say that there is gas, that it's flowing, and that we have time - that's simply wrong," National Economic Council vice-chairman Morris Dorfman said today in a discussion of the gas arrangement at the National Economic Council.
He continued, "The first goal in writing the gas arrangement is developing the reservoirs. Leviathan must be developed, Tamar must be expanded, and Karish and Tanin must also be developed. The second goal, creating competition, comes only after that. We can't create competition tomorrow - only in the medium and long term."
Dorfman said that this time, competition will be real. "This time, the competition will be between reservoirs, not all sorts of games and stratagems requiring the gas companies to compete with each other within the same reservoir," he declared.
Dorfman added, "There's already a problem of supply, compared with demand, and the shortage will only get worse. The arrangement will make possible a relatively quick sale of Karish and Tanin, because the gas companies will prefer selling the reservoirs before they are given to a trustee."
Participants in the discussion included geologist Dr. Joseph (Yossi) Langotsky; Idan Wallace and Yossi Abu, representatives of Delek Group Ltd. (TASE: DLEKG) controlling shareholder Yitzhak Tshuva; Delek Energy Systems Ltd. (TASE: DLEN) chairman and Avner Oil and Gas LP (TASE: AVNR.L) CEO Gideon Tadmor; Tshuva's lawyer and media consultant; Antitrust Authority director general Prof. David Gilo; and Noble Energy Israel company manager Binyamin Zomer.
Dorfman also said, "The Tamar reservoir is one of Israel's biggest financial assets. Although many think it's easy to sell it, that's not the case. We're talking here about an asset worth NIS 20 billion, and it's no easy task to sell this within the six-year period given to Delek Group."
Answering critics who said that the six-year period allowed for the sale of Tamar was too long, Dorfman said, "I've heard some say that by the time Delek sells it, the gas will run out. That's not true; demand in the Israeli economy is eight billion cubic meters, and the Tamar reservoir has 300 billion cubic meters, so there will be quite a lot of gas left over."
Asked by MK Tamar Zandberg (Meretz) why rapid development of the reservoirs was necessary, Dorfman answered, "There's enough gas in the reservoir, but the problem is that there's still only one reservoir and one pipeline."
Commenting on the gas price, Dorfman stated, "We decided that until the structural change is completed, there will be a maximum price. We divided it into two: key oil consumers, such as industrial customers, will receive the best gas contract in the Israel economy, and customers less reliant on oil can count on getting the average gas price in the Israeli economy. We decided at as soon as the companies sign export contracts, they will have to offer customers in Israel the same terms.
MK Dov Henin (Joint Arab List) argued, "When Noble Energy is in both Tamar and Leviathan, there's no competition. Noble Energy won't compete with Noble Energy. Furthermore, the gas companies received their licenses for practically nothing. That's a scandal that should be investigated."
"We have no other operators for Tamar," Dorfman answered.
Adv. Gilad Barnea: Why not let Edison S.p.A operate Tamar?
Adv. Gilad Barnea, active in human rights and other social issues, claimed that the government should have dealt with the problem of gas redundancy several years ago, and added that he knows of at least one company that could operate the Tamar reservoir beside Noble Energy.
"Why not let Edison S.p.A operate the Tamar reservoir? Because the companies want to maintain their monopoly," Barnea said.
Gilo: The biggest problem is Noble Energy's cross ownership in Tamar and Leviathan
Gilo said that the biggest problem with the gas arrangement was the fact that Noble Energy would continue holding both Tamar and Leviathan.
"I understand the concern of the government ministries that if they take unilateral measures, the monopoly will carry out its threat by not developing the Leviathan reservoir. I'm not authorized to weigh considerations other than competition, and I'm not an expert in them. I'm only an expert on competition. At the same time, I haven't lost sight of other considerations, and that's why I made an effort to reach an agreed solution. I would accept some damage to competition, but only up to a certain point.
"The main problem is cross ownership by Noble Energy, which will continue owning 25% of Tamar and 40% of Leviathan. This will block competition, and there's no chance of competition. Tamar won't want to compete with Leviathan, and Leviathan won't want to compete with Tamar. Therefore, there will be no competition, because Karish and Tanin, which have high costs, won't be able to complete with the big reservoirs."
Langotsky: A lack of national responsibility
In the discussion, Langotsky said, "There must be no gas exported from Tamar to Egypt before Leviathan is connected. Are you fools? All the security experts decided to export gas to Egypt for security reasons, but that's foolishness and lack of national responsibility. I could understand financial considerations, but national considerations? Only two weeks ago, the president of Royal Dutch Shell visited Israel and said that Israel shouldn't export gas." Langotsky added, "The gas companies are natural bullies. They want to maximize profits; that's their purpose. But Israel? Are you idiots? If, God forbid, something happens to the Tamar reservoir or to the pipeline, there will be an investigative committee that will single out the guilty parties but how will that help us?"
Ministry of National Infrastructure, Energy, and Water Resources Petroleum Commissioner Alexander Varshavsky asserted, "The international companies took no interest in Israel, and those that did take an interest were unsuitable. Development of the Tamar reservoir is a task of great technological and engineering complexity, and not every company can do it. That's why we didn't demand that Noble Energy sell off its holdings in Tamar.
"Our difficulty in finding another operator is real."
Varshavsky responded to Henin's argument that the licenses had all been given to Delek Group and Noble Energy by saying, "That's not true. Licenses were given to everyone, and they also belonged to other companies, but only Delek Group and Noble Energy found gas."
Zomer: British Gas gave up on Israel
Addressing the issue of gas exports, Zomer said, "In the discussions by the Tzemach Committee in 2011, people asked them the same questions that you're asking now, 'How did Delek Group and Noble Energy get so many licenses?' Ori Schwartz answered then, and I'm answering now - it happened because no one wanted to come to Israel.
"We didn't break the law, we didn't make an agreement in restraint of trade, and we didn't prevent competition. What we did do was succeed beyond the expectations of the Israeli government. As long as we were unsuccessful in finding gas, Israel was happy about it. The lies we're heard in recent week are terrible.
Zomer further described the course of events that led to Noble Energy owning all the gas licenses: "In 1998, Noble Energy came to Israel and received its rights in Yam Tethys - not from the government, but from Avner Oil and Gas, which found no other company. Eight years later, in 2006, Noble Energy obtained rights in Tamar - again, not from the government, but from British Gas (BG), which gave up on Israel. BG tried to interest more than 100 companies in this reservoir, and only Noble Energy agreed to come in. In 2010, Noble Energy obtained the rights to Leviathan - again, not from the government, but from Delek Group."
Published by Globes [online], Israel business news - www.globes-online.com - on July 6, 2015
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