New govt seen adopting Tzemach report

It is believed that the government's policy outlines will include the committee's recommendations on natural gas exports.

The recommendations of the Tzemach committee allowing the export of Israeli gas will be included in the policy outline of the new government, government sources believe.

According to the wording that will appear in the policy document, the government will adopt the committee's recommendations within a month of being formed. The recommendations are widely supported in the government by the Ministry of Finance, the National Economic Council, the Ministry of Energy and Water Resources, and other government agencies, but the Ministry of Environmental Protection has reservations and believes that the decision should be deferred until a full picture emerges of the gas reserves in Israel's possession and of the expected demand for gas in the Israeli economy.

Government approval of the Tzemach committee recommendations will enable the deal to sell 30% of the rights in the Leviathan reserve to Australian company Woodside for $1.25 billion to be completed.

The gas exploration market has been waiting for approval of the Tzemach committee recommendations since September 12, the day that the inter-ministerial committee to examine government policy on the natural gas economy, headed by Ministry of Energy and Water Resources director general Shaul Tzemach, submitted its final report to the prime minister. At the center of the report stands the recommendation to allow rights holders in gas reserves to export up to 50% of the gas in a reserve. Rights holders will be able to trade exporting rights in order to be allowed to export up to 75% of the quantity of gas in a reserve.

The committee's recommendations allow the export of gas subject to certain conditions, among them the connection of the reserves to the Israeli mainland and the maintenance of gas reserves in Israeli hands sufficient to supply the needs of the local economy for 25 years. The committee estimated that Israel would need 450 BCM (billion cubic meters) of gas, and that the quanity of surplus gas available for export would be 500 BCM.

Woodside, which specializes in gas export projects in Australia, decided to buy the rights in Leviathan on the basis of the recommendations, and after talks between Prime Minister Benjamin Netanyahu and its CEO Peter Coleman.

The Tzemach committee recommendations were in doubt after a series of disappointments in drillings in the Sara, Myra, Ishai and Shimshon licenses. The quantities of gas discovered in these drillings was 90% below forecasts, and critics of the committee argued that its recommendations should be reviewed.

The fear at the Ministry of Energy and Water Resources is that developers may exploit the uncertainty over gas exports to establish facts on the ground lay behind the letter from Minister of Energy and Water Resources Uzi Landau to the Tamar gas field developers in which he asked them not to sign gas export agreements until government policy on the matter was settled. Landau sent the letter following reports by the partners in Tamar of the signing of an agreement in principle with a subsidiary of Russian gas giant Gazprom for the export of gas from Tamar. The agreement covers the entire quantity left in the reserve, after the agreements with Israeli customers, chiefly Israel Electric Corporation, will have been fulfilled.

Published by Globes [online], Israel business news - www.globes-online.com - on March 13, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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