The regulatory knot has been loosened; the political knot is back those were the tidings to which we awoke this morning following the closing of the talks between the state and the gas developers. The cabinet meeting on Sunday will have a declarative significance, but not much more than that. The power still rests in the hands of Minister of Economy Aryeh Machluf Deri, who is authorized by law to approve bypassing the antitrust regulator and provide the developers with exemptions from a binding arrangement on political and security considerations according to clause 52.
Netanyahu, who appears unable to make Deri sign the exemption, will be forced to make his way to the Knesset plenum and hope for a better experience than the humiliation he suffered last time around. Yisrael Beytenu chief Avigdor Liberman said Thursday to Israel Army radio that he will “likely support the agreement” but that he will likely be unable to press his fellow faction member Orly Levy-Abekasis to do the same. Liberman could at best bring four MKs to support the roadmap, which leaves Kulanu in a decisive role. Kulanu chief and Minister of Finance Moshe Kahlon will make every effort to assure his eight faction members not including himself and Yoav Golant who excused themselves from the vote can vote freely.
No one, except maybe Kahlon, knows towards which side the faction members are leading, but it is fair to assume that most of them will oppose the roadmap there are more than a few MKs with social leanings in Kulanu’s ranks. Add a few MKs from the coalition like Moshe Gafni, who does not hide his opposition to the agreement and you have a recipe for a real nightmare for the prime minister.
The actual agreement presented this morning by Netanyahu and Minister of Energy Yuval Steinitz shows a significant improvement over the previous version, specifically on the issue of tying gas prices in new contracts to the Public Utilities (Authority) rate and the Consumer Price Index. The linkage will lead to a substantive decrease in gas prices of the new agreements and, in the future, will affect the contract with Tamar, where the pricing may be updated in 2021. The additions of a binding milestone to the timetable for the development of Leviathan and commitments for local procurement are also important.
Still, a few questions remain that were left without clear answers. The most prominent being the issue of the additional pipeline from the Tamar reservoir to the Israeli shore. The additional pipe is essential for the security of a market whose entire gas supply flows through a single line. The development of the Leviathan reservoir and the Tanin and Karish reservoirs could solve the problem, but the development plans for each of these fields are still dependent on external actors that the government does not control.
That’s why we raised more than one eyebrow when we noticed the demand for the laying of another pipe from Tamar was dropped from the roadmap. The additional pipe had already been agreed with the developers, as part of the project to export gas from Tamar to Egypt. Why the concession on the second pipe?
That question was asked of more than a few government officials and their answers were unconvincing, if not evasive. It looks like we will only discover the real reason in the future. In retrospect, it appears that the balance of power in the negotiations between the developers and the state had heavily favored the government.
The developers agreed in the end to every proposal by the government, as long as it did not cross their red line and demand to reopen signed commitments. The real negotiations happened inside the government, between different arms and departments, with each one motivated by different interests sometimes even conflicting ones.
Therefore those who claim the state surrendered to a monopolist do not see the full picture. Take, for example, the decision to leave Noble Energy as the operator of the Tamar reservoir a demand raised by none other than the oil supervisor of the Ministry of Energy.
Published by Globes [online], Israel business news - www.globes-online.com - on August 13, 2015
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