"We haven't yet caught the Leviathan, and we're already selling its skin for export," says Yonatan Friedman, who until a year ago was professional energy adviser to Minister of Energy and Water Resources Uzi Landau, and who is currently a member of the Oil Council, and an independent energy consultant, in response to the publication of details of the draft final report of the committee on the structure of the gas economy, headed by Ministry of Energy and Water Resources director-general Sahul Tzemach.
"I haven't seen the draft final report of the Tzemach committee, I've seen the reports in the press. I'm not against exports in principle; I'm against decision being made before the country has made the decisions that are important for it: how it is going to meet its own needs, through a masterplan for natural gas exploration and production. Once that's clear, it will be possible to discuss exports."
The argument of the supporters of 'exports now' is that without a commitment to massive exports, it won't be worth investors' while coming in to invest in development of reserves.
"I don't accept the argument that only assured exports will bring investors and encourage development and production. A promise about the future must first of all drop anchor in the domestic market. The government is responsible for this commitment, until the natural gas economy reaches maturity."
It's a fact that there is pressure on ministers and officials for an immediate decision on exports.
"Even the companies know that exports could be lucrative, but may not happen at all. They too know very well what's happening in natural gas exploration and in the big discoveries around the world, including near us."
So perhaps they need a promise of exports to give cover for high levels of credit from the banks?
"Anyone who counts on exports to secure financing for exploration and development projects is liable to end up with nothing. It's a very big gamble to count on exports. So perhaps the companies are deluding themselves, and perhaps it’s a way of boosting their share prices. Stories of gas that will be channeled to exports at a price of $14 or $15 per MMBTU, which is indeed the price today in Japan, perhaps helps share prices now, but it will take several years to build the installations, and the whole world is busy looking for gas. Unfortunately, the world does not appear to be waiting for Israeli natural gas exports. Only last year, international companies discovered in Africa, off the shares of Mozambique and Tanzania, huge gas reserves, bigger than the discoveries in Israel."
So what now?
"The state must first of all start to exercise its sovereignty over natural gas and the reserves and stop trembling at the veiled threats of the gas exploration companies. The companies tell the government that without export approvals they won't be able to carry out development, so the government must first and foremost be clear and say: You received licenses, you are obliged to develop the reserves, or else the licenses will be taken away from you. At the same time, the state must create a mechanism of assured local procurement for all the gas exploration projects that have received licenses up to now. That way, it will create certainty for the gas exploration companies that they will have a buyer for any gas that is found. That way, small reserves will also be developed, and not just the massive ones. The discussion about exports should be deferred until afterwards."
The US administration still doesn't permit exports.
"The US has gone from being an importer of gas to being the biggest gas producer in the world through shale gas, and it is still not allowing large export projects until the full picture of its reserves and long-term policy for use of natural gas becomes clear. This is the right step for us to take. First of all local supply, then exports."
Manufacturers: Don't set natural gas export quotas until the economy's needs are clear
Manufacturers Association president Zvi Oren opposes the recommendation of the Tzemach committee that no less than 53% of natural gas production should be for export. Talking to "Globes", Oren called on the government to avoid making a binding decision on the matter, and stressed that it was still too early to set a quantity for gas exports, in the absence of figures and information. "No-one is yet ready to decide about how much natural gas should be exported. We do not at the moment have enough final figures and information about the size of the natural gas reserves in the Mediterranean and about the real needs of the economy," he said.
Oren calls on the government to delay a decision on the size of gas exports for two years. "The government can wait on this for two years, to see how large the reserves are and how much natural gas industry actually consumes. At present, the committee is formulating a recommendation on the size of exports, but what if industry actually consumes more than it allocates?" Oren asked.
Oren, who also serves as chairman of the Economic Organizations Liaison Bureau, raised the question of the supply of natural gas to industry when he met Prime Minister Benjamin Netanyahu last week, as well as the minister of finance and the minister of industry, trade and labor, who were present at the meeting, that the current shortage of natural gas was harming Israeli industry's competitiveness on world markets, and that the rise in fuel prices was leading to rises in production costs."
The Tzemach committee, which examined the supply of gas to small and medium-size factories, won praise from Oren for its recommendations on that subject. "The committee determined that the existing Tethys Sea pipeline should enable gas to flow to small and mid-size factories. This is a lifesaver for factories currently groaning under high production costs, among them Phoenicia America-Israel, which has got into financial difficulties because of the lack of gas," Oren said.
Erdan: The Finance Ministry is only looking at the short term
"The decision on massive gas exports contradicts Israel's clear national interest," Minister of the Environment Gilad Erdan said yesterday. "This is the same national interest that the prime minister identified and because of which he set up the Kandel committee on alternative energy. To seek energy independence and then, when we finally have an alternative to oil, to immediately go and sell it what sort of logic is that? It should be precisely the other way around: first of all, there should be a clear statement that the country encourages consumption of natural gas, so that the market industry, transport, and households as well will know that it has a future of cheap natural gas and that the government encourages the use of it. This will encourage enterprise in energy and new industries. But if the government now, even before the gas arrives, already allows exports like this, then why should anyone invest in a factory when he doesn't know what kind of energy he will be able to use and how much it will cost?
"The element of energy self-sufficiency and independence from imports and from our neighbors is decisive," added Erdan. "In a war situation, we could encounter a supply problem. The government must take this into account first and foremost.
"In Seoul, all the buses run on natural gas. The World Health Organization found that buses running on gas emit 75% fewer carcinogenic respiratory particles than buses powered by diesel. But here we rush to set up a committee on which the Ministry of transport and the Ministry of Industry, Trade and Labor are not represented, and their points of view are not heard."
Erdan fingers the Ministry of Finance as responsible for the basis of the export decision. "The Ministry of Finance looks only at the immediate future, only to the short term. Where there is a bonanza today, money must be made from it right away. I and my ministry insist on the same unvarying interest: an assurance of natural gas for the whole economy, as quickly as possible."
Published by Globes [online], Israel business news - www.globes-online.com - on August 23, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012