I wasn't in the room in which the decision was made about the future of the gas industry, but I'm sure that none of the decision makers was happy. This is a bad decision, but, as they say about democracy, all the alternatives were worse. The monopoly will remain with us, and perhaps will become stronger, but the only opportunity that Israel had to break it was missed exactly a year ago, in large part thanks to the person currently attacking the government for surrendering to it. Australian company Woodside was the only real threat to Noble Energy's hegemony. It came here with the will and the ability to develop the Leviathan gas reserve. Its demand for tax concessions was a very low price for the possibility of breaking up the monopoly that will reign here in the decades to come.
But there was one person who thought that the price was exorbitant and scandalous. MK Shelly Yachimovich conducted a determined campaign, demanding that the talks with Woodside should stop. The public pressure she brought to bear on Tax Authority director Moshe Asher proved effective: Asher called Woodside CEO Peter Coleman minutes before the signing ceremony for the agreement on the company's investment in Leviathan. Coleman slammed down the telephone and packed his bags. Woodside never returned here. "The cancellation of the deal saved the country from prolonged humiliation," Yachimovich declared at the time. Irony at its best.
The decision to come to terms with Noble Energy's control of Israel's two main gas reserves, Tamar and Leviathan, was predictable. As soon as the crisis broke, we said that the government would have no choice but to capitulate. Not because of the pressure from Noble Energy, and not because it was spineless in the face of the tycoons, but simply because that is the reality. This decision signifies the victory of realism and responsibility over justice and emotions. A victory of economists and energy experts over lawyers, academics, the media, and social activists. The baddies beat the goodies, and it's just as well.
The facts are simple and not amenable to any other interpretation. Israel failed to develop the capabilities required to operate gas reserves itself. The fault lies with a lack of vision, the weakness of the Energy Ministry and all the ministers who headed it in the past decade, and the ever tight fist of the Finance Ministry.
Even if a decision were made today, it would be years before we had such capabilities. These would be lost years for the gas industry, and the damage caused would dwarf the advantages of breaking up the monopoly: the postponement of billions in state revenue, a halt in the conversion of factories to gas, loss of export agreements, and that's just the start.
The other, much more simple option is to bring a serious international company here to compete with Noble. The companies that have come here so far have mostly been ephemeral. Had they received responsibility for the strategic gas reserves, it would have been liable to end in disaster. There is one heavyweight company here, Edison, but its behavior has been strange. It has kept a low profile and has not shown interest in the major reserves, apparently because it has more important interests in Egypt.
Anyone who seriously means to break the monopoly and not just sound off slogans to the media understands that for that to happen a company has to come here with serious know-how, capability, and character. After Woodside's withdrawal the chances of that are not high, and even if such a company were to turn up tomorrow, it would demand conditions and guarantees at least as good as those the Australian company asked for. That's the reality, and whoever isn't prepared to accept it can drink the sea at Gaza.
Published by Globes [online], Israel business news - www.globes-online.com - on May 11, 2015
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