Gas Authority raises gas demand forecast 20%

The Natural Gas Authority's revised forecast has reignited the argument in the Tzemach Committee over export allocations.

The Natural Gas Authority has raised its forecast of domestic gas demand by 20% by 2040, reigniting the argument in the Tzemach Committee over exports. Most committee members say that the revised forecast means that Israel will have to increase its strategic reserve, reducing gas available for export.

However, the Ministry of Finance is refusing to accept the revised forecast and says that Israel need not keep gas reserves for more than 15 years.

Natural Gas Authority director Shuki Stern today submitted the revised forecast to the government committee for the review of natural gas policy chaired by Ministry of Energy and Water director general Shaul Tzemach. The forecast presented in the committee's interim report estimated Israel's domestic gas consumption at 420 billion cubic meters (BCM) through 2040, most for the generation of electricity and the rest for industry and transport. In response, scientists at the Ministry of Environmental Protection and Ministry of Energy and Water Resource told the committee that the estimate was flawed.

The Natural Gas Authority reassessed its report, and increased its estimate of domestic gas demand to 501 BCM through 2040. It reduced its estimated electricity savings from improved energy efficiency, and therefore increased the amount of gas needed for the generation of electricity.

The Tzemach Committee will decide how much natural gas can be exported in two weeks.

The Tzemach Committee is also sharply divided on the gas pipeline network and the construction of a liquefied natural gas (LNG) facility for gas exports. The interim report states that an LNG facility should only be built on Israeli territory, but committee members now estimate that it will take at least 7-10 years to build a facility, which means that no gas exports will be possible for years, unless the government allows gas producers to use export facilities in Cyprus or other countries.

The National Security Council member of the Tzemach Committee opposes in principle to permit gas exports via third countries, and suggests examining the possibility of building an LNG facility in shallow water.

In response to a "Globes" report that the Israel Antitrust Authority was considering requiring Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc. (NYSE: NBL) to sell their holdings in either Tamar or Leviathan, Antitrust Authority chief economist Shlomi Parizat said, "The natural gas market is like a ball of spaghetti. We have never encountered a market with so many cross-costs between competing competitors."

In response to Antitrust Authority director general David Gilo's revisions to the Tamar partners gas supply contracts with independent power producers, Parizat said that they were not "sweeping" revisions that would apply to all future contracts.

Natural gas exports will be the central point of the Tzemach Committee's final report, due at the end of the month. The interim report advised permitted the export of 50% of gas from large reservoirs and a higher proportion from mid-sized reservoirs.

Former Antitrust Authority director general David Strum calls for the government to lower the export caps for the Tamar and Leviathan reserves. He also hints that he supports splitting ownership of Tamar and Leviathan, although he admits that this would set a precedent. We have two fundamental questions here," he says. "We have a supplier that is a monopoly and the question is whether, for the first time in Israel's history, proactive measures should be taken to split the holdings. This is possible. The second question is whether we can tell a monopoly (referring to Israel Electric Corporation (IEC) (TASE: ELEC.B22) - A.B.) and set aside gas reserves for consumption by the new power producers. In my opinion, the answer to the second question is yes. It would be a serious mistake to allow the Tamar and Leviathan reservoirs to export 50-60% of their gas. For smaller reservoirs yes, but we must not extend this generalization to Delek Group and Noble Energy."

Published by Globes [online], Israel business news - - on July 10, 2012

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

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