Three years ago exactly Israel Corporation (TASE: ILCO) approved a huge deal to buy Egyptian gas from East Mediterranean Gas Co. (EMG). The preference for EMG rather than the rival bid submitted by the partners in Israel's Tamar field was mainly for reasons of price.
Israel Corp. could not have been expected to guess that one month after signing the agreement Egyptian President Hosni Mubarak's regime would collapse and with it the dream of Egyptian gas. None of Israel's intelligence agencies saw what was coming and Israel Corp. could not have been expected to understand intelligence better than those agencies.
But they also did not understand that the Egyptian natural gas sector was heading for a serious crisis due to a grave and worsening shortfall in natural gas for Egypt itself. Most gas experts believed that Egypt would find it hard to comply with their agreement to export gas to Israel. Israel Corp. probably preferred to pay attention to unsuccessful gas experts. It's not good but that's what there is.
But one thing that Israel Corp. should be experts at is how to make deals. In any deal, as Israel Corp. should know well, the credibility of the seller is no less important than the price. It's true for second hand car salesmen and certainly true for a person selling $9 billion worth of gas over 15 years.
The supply of Egyptian gas to Israel began in 2008 so it was no major effort to approve the huge deal with EMG. It would have been possible for example to ask the then Minister of National Infrastructures Binyamin Ben Eliezer who could not be accused of hostility towards Egypt. Earlier this month at the Israel Business Conference he said, "The Egyptian supplier did not meet its commitments even for one single week. Every few days I had to phone up Omer Suleiman and each time they had a different story."
Dear Israel Corp directors, I will now ask questions that should have been asked a long time ago but better late than never. If in approving the gas deal with EMG did you meet your obligations of trust and make sure that the management was not entering a hasty and dangerous deal? If after the deal did you ever demand from Israel Corp. and its CEO Nir Gilad an explanation for their role in the deal that collapsed? The last question concerns the future. Israel Corp. will ultimately receive the gas it needs from Tamar. The problem is that this gas will be at the expense of gas that won't reach other customers. Industrial enterprises in the periphery employing thousands of workers are in danger of closing down as a result of the natural gas shortfall. Do you think that Israel Corp. carries some sort of responsibility for the fate of these factories and workers - direct or indirect, legally or at least morally.
Published by Globes [online], Israel business news - www.globes-online.com - on December 24, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013