Israel's offshore Leviathan gas field was discovered in 2010 but it was only officially recognized by Israel's Ministry of National Infrastructures, Energy and Water Resources in 2014. According to a report by the State Comptroller the delay cost Israel's state coffers hundreds of millions of shekels.
In 2010, the Leviathan partners announced the discovery of 453 billion cubic meters (BCM) of natural gas, with estimates since raised to 620 BCM. But State Comptroller Matanyahu Englman found that the Ministry of National Infrastructures, Energy and Water Resources did not officially recognize the discovery until 2014.
The State Comptroller wrote, "At a meeting held between the Tax Authority and Ministry of Energy in June 2016, the Ministry of Energy said that in engineering terms the discovery could have been recognized in 2012 but the Leviathan rights holders did not submit the financial data for the capitalization of cash flow from the venture's economic point of view."
In their response the Leviathan partners told the State Comptroller, "Already in December 2010 they reported to the Ministry of Energy about the commercial discovery, due to the results of drilling and information based on substantial volumes of resources and the commercial production capabilities in the relevant area of the rights."
There has been scathing criticism in recent years about the sovereign wealth fund, due to the fact that the Leviathan and Tamar fields have generated huge revenue and yet the fund has not begun operating. The fund is due to start operating when it has NIS 1 billion and yet until today only NIS 900 million has accrued. Back in 2013, the Bank of Israel forecast that the fund would have several billion shekels by 2021.
The State Comptroller now reveals that by not recognizing the Leviathan field as a discovery earlier than 2014, the Leviathan partners were able to enjoy major tax subsidies for longer because the field was still officially a high risk venture, subject to reduced taxes.
Published by Globes, Israel business news - en.globes.co.il - on October 19, 2021.
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