Bank of Israel: Don't restrict gas exports

The Bank of Israel will support minimal restrictions on natural gas exports.

Sources inform ''Globes'' that the Bank of Israel will support minimal restrictions on natural gas exports. The central bank recently decided on its position ahead of the final report by the committee on the gas market structure, chaired by Ministry of Energy and Water Resources director general Shaul Tzemach.

The Bank of Israel's position agrees with the position of the Ministry of Finance and the National Economic Council's representatives on the Tzemach Committee. The supporters of gas exports believe that considerations of ensuring a free and sophisticated market in gas greatly outweigh greater national energy security by restricting exports. The Bank of Israel's position is also in line with that of Prof. Eytan Sheshinski in an interview with "Globes" last week. The Bank of Israel has observer status on the Tzemach Committee.

The pro-export position is mainly opposed by the Ministry of Environmental Protection, which wants tighter export restrictions than the Tzemach Committee's interim recommendations in April. Most of the other committee members have not yet explicitly supported either side, although Deputy Attorney General Avi Licht is leaning toward the Ministry of Environmental Protection's position.

The Tzemach Committee is due to submit its final report ahead of Rosh Hashana (Jewish New Year) in mid-September, three months behind the original deadline.

Supporters of the free market in gas exports believe that the government should not dictate to the gas fields' developers how to develop the fields and export gas from them. However, they do support reservations to prevent market failure, the first of which is to require the licensees to honor contracts already signed with Israeli customers.

The second reservation is to ensure that there will be infrastructure limitations on the offshore gas fields' ability to deliver gas to the Israeli market. The third reservation is to ensure that Israel will have a strategic gas reserve for emergencies.

Israel's current natural gas reserves are estimated at 800 billion cubic meters (BCM). The Tzemach Committee's interim report recommended exporting half the reserves and keeping the reset as a strategic reserve to guarantee gas for the domestic market through 2040.

Minister of Environmental Protection Gilad Erdan has called for delaying a decision on gas exports by several years.

At internal discussions by the Tzemach Committee Ministry of Environmental Protection director general Alona Sheffer-Karo called for increasing the strategic reserve by 20%, similar to the increase in natural gas consumption forecast by the Natural Gas Authority. The Ministry of Environmental Protection is prepared to allow 300-350 BCM in gas exports, considered the minimum that would make construction of an LNG facility for exports economically worthwhile. This amount does not make it worthwhile to build a floating liquefied natural gas (FLNG) facility in additional to an onshore facility.

The Ministry of Finance's representative on the Tzemach Committee, Shaul Meridor, initially demanded a strategic reserve sufficient for 15 years domestic gas consumption, but agreed to compromise on 25 years.

The Bank of Israel said in response, "The Bank of Israel notified the Tzemach Committee of its position, and does not discuss the matter in the media."

Published by Globes [online], Israel business news - www.globes-online.com - on August 16, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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