Antitrust regulator pressed to accept gas compromise

The Israel Antitrust Authority fears that its opposition to the natural gas monopoly compromise will be bypassed.

Israel Antitrust Authority legal advisor Adv. Ori Schwartz is asking director general Prof. David Gilo to allow a compromise proposed by the regulators for the structure of the natural gas sector, sources inform "Globes." It is believed that Schwartz is worried that the regulators will find a way to bypass Gilo, thereby setting a precedent. Antitrust Authority chief economist Assaf Eilat is also advising Gilo to fall in line with the other regulators.

As reported exclusively in "Globes" last week, the regulators, including the Ministry of National Infrastructure, Energy, and Water Resources, the Ministry of Finance, and National Economic Council, have devised a new compromise for arranging the Israeli gas industry, three months after their first proposal. The new compromise makes no change in the structure of the Leviathan natural gas reservoir, and the partners will not have to compete with each other to sell gas from it (no separate marketing). Instead, the price of gas in future contracts will be loosely controlled. For the Tamar gas reservoir, it was agreed that Delek Group Ltd. (TASE: DLEKG) would have to sell its holdings, and Noble Energy will have to dilute its holdings from 36% to 25%. It was also agreed to require Delek Group and Noble Energy to sell their holdings in the Karish and Tanin reservoirs.

The regulators presented their formula to Gilo on the same day, and he said he would not support a compromise that did not require the partners to compete with each other in the Leviathan reservoir, and which allow Noble Energy ownership of both the Tamar and Leviathan reservoirs.

It is easier, however, to bypass Gilo than the gas partners previously thought, which would also set a precedent for matters not necessarily involving natural gas. Prime Minister Benjamin Netanyahu is already promoting a national projects bill for energy, transportation, infrastructure, and housing. The bill is designed to make it easier to go forward with major projects, while bypassing bureaucratic roadblocks. In this case, Gilo is a bureaucratic roadblock that can be bypassed.

Furthermore, the gas partners, and now the other regulators as well, are citing Section 52 of the Restrictive Trade Practices Law, which authorizes the Minister of the Economy, after consultation with the Knesset Economics Committee, to grant an exemption for a restrictive practice "if he believes that this is required for reasons of foreign policy or national security." This is another way of bypassing Gilo, and this is exactly what the Antitrust Authority fears.

The Antitrust Authority said, "No one at the Antitrust Authority thinks that the emerging proposal will lead to real competition. In any case, the Antitrust Authority does not comment about internal discussions."

Published by Globes [online], Israel business news - - on May 12, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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