The cabinet today decided to establish a sovereign fund for the state's revenues from oil and gas discoveries, on the basis of the Taxation of Oil and Gas Revenues Law (5771-2011) the Sheshinski Law. The fund's profits will be allocated for education and security projects approved by the cabinet.
On the basis of the recommendation of the committee established to review the sovereign fund, half of state revenues from oil and gas resources (incomes from the tax on excess profits) will be deposited in a fund that will invest abroad and will constitute a "security cushion" for dealing with national events with extraordinary economic implications such as wars, natural disasters, economic crises, etc. The fund's assets will be managed, in accordance with rules that have yet to be determined, by the Bank of Israel, under a supervision and oversight mechanism to be led by the Ministry of Finance to ensure maximum public transparency.
Oil and gas revenue is estimated at $100-130 billion over 30 years, at least half of which will be the government's take. The government will allocate 4% of future revenues for education and security or any other purpose.
In the event of extraordinary circumstances, it will be possible to borrow from the fund.
Detailed draft legislation on the management of the fund will be submitted to the Ministerial Committee on Legislation in the coming weeks.
Prime Minister Benjamin Netanyahu said, "We began to deal with gas royalties with the Sheshinski Committee. Today, we will begin the discussion that will lead to the creation of a sovereign capital fund, the fruits of which will be allocated to Israel's vital needs, especially education and security."
Netanyahu appointed Prime Minister's Bureau chief Harel Locker to head the committee that will examine the development of Israel's natural gas economy. The committee will also examine geopolitical aspects of the industry, including exports to Asia, economic ties with other countries, and the development of gas supplies to the domestic market, including for the production of electricity.
The setting up of the committee was not smooth, with the Ministry of Energy and Water expressing amazement over its establishment.
Published by Globes, Israel business news - www.globes-online.com - on February 19, 2012
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