Delek Drilling chairman: Gas has become a political football

Gideon Tadmor  photo: Uria Tadmor

"There is no end to the lies in the media about the return in the Tamar project."

In the gas monopoly's first response to the plan for the gas industry, which was unveiled this week, Delek Drilling Limited Partnership (TASE: DEDR.L) chairman and Avner Oil and Gas LP (TASE: AVNR.L) CEO Gideon Tadmor today said that the opposition to the gas plan was the result of demagogy and driven by lies spread in the media. Tadmor was speaking at a panel entitled, "Cost-Benefit in Regulation The Gas Sector Example" at the annual conference of the Association of Publicly Traded Companies, held in cooperation with the Goldfarb Seligman law firm and the BDO Ziv Haft Consulting Group. He added, "If you want to get ahead in politics, you start repeating catchy slogans. Instead of conducting a professional discussion and talking about the data and the facts, we’re hearing groundless slogans.

"For the gas partners, the proposed plan is something we can't do without. We had to agree to it. The plan contains difficult provisions with no precedent anywhere in the world. It is very regrettable that our energy future has become a political football. Decisions should be based on professional, not political, consideration. They're forcing us to sell three of the four reservoirs we discovered, and that seems all right to everyone. Is this the way to encourage and persuade new investors to come to Israel? What's the message we're trying to deliver? Come, sweat, invest, and if you find something, we'll force you to sell it," Tadmor complained. "A violent and lying campaign of incitement and slander is being conducted against the gas industry and its leaders. The people who are organizing the incitement are doing it from purely political motives for the purpose of striking a blow against the government. Gas prices in Israel are among the lowest in the Western world, and that's a fact agreed to by experts in Israel and overseas. The opponents are manipulating the figures in order to buttress their fraudulent arguments. You don't have to be an expert to recognize that this is a political struggle by parts of the left against the government. There are certain political groups, and I think everyone here knows who I mean, that do not hesitate to spread lies and threats, and to level groundless accusations against the industry and its leaders, even at the price of dealing a critical blow to the Israeli gas industry," Tadmor charged.

Tadmor also commented on the complaints about gas prices, saying, "The truth is completely different. If you subtract the huge $4 billion investment, the production costs, taxes, royalties, Sheshinski levy, and financing from the $5.45 per mmbtu price of gas, we're left with less than $1 profit per mmbtu. The state's share of the proceeds after Sheshinski is unprecedented - over 60%. The lies heard in the media about the return on the Tamar project are inconceivable. It's simply manipulation. There are de facto price controls here. If it looks like a duck, walks like a duck, and quacks like a duck, it's a duck. If you're asking about the return on our investment, it's 20%. In his report, even Sheshinski estimated an 18% rate of return. If you look at the rest of the world, where there are no geopolitical problems, the average return in deep waters is the same or higher.

"Even the Antitrust Authority professionals support the plan. Except for one person, everyone agrees with the plan. Enough is enough."

Noble Energy Israel CEO Binyamin (Bini) Zomer also responded today to the plan, saying, "Our return in Tamar is ordinary. The return on such reservoirs around the world is 18-25%. If you look at the report by IHS Energy, a reputable international consultant firm, it states that the price is reasonable."

Asked whether Noble Energy would meet the timetable for the development of the Leviathan gas reservoir, Zomer answered, "We want to develop it, and are committed to developing it. First, though, we have to find a way of financing this $10 billion project, and we have to sign contracts. Before the Antitrust Authority director general revoked his agreement with us, we were investing $20 million a month in the Leviathan project."

Tadmor addressed the possibility of changes in the plan, saying, "We agreed to this specific plan. Even though it was hard for us, we agreed to it, as long as it is the plan. We won't be willing to take another significant step. I can tell you that the current plan presented is the current formula we're committed to - and to that only." In this context, Zomer added, "Anyone who thinks that we'll come to a public hearing and there'll be a buffet from which everyone can take what's good for him and leave us what's bad is wrong. Those proposing this haven't done their cost-benefit homework."

Ministry of Finance budget department energy coordinator Adi Hachmon asserted, "The state did not surrender to Delek Group and Noble Energy. All in all, I'm satisfied with the total picture. The state is getting a promise that Noble Energy will develop Leviathan by July 2019. As far as prices are concerned, a $3 price is unrealistic. In the current plan, the companies have undertaken to offer customers the same prices as for exports."

Knesset Finance Committee chairman MK Moshe Gafni (United Torah Judaism) told the panel, "Israel keeps piling on the regulations, until the investors run away. Leviathan must be developed. The Knesset is becoming more and more social. Even Netanyahu is becoming social, which makes it seem like the Messiah is coming. When people are talking about social awareness, they start thinking about the fact that they gave the natural resources to a small group at a time when there are people living in boxes, and we start thinking, 'This gas belongs to us - the people of the country.' It's fine that the gas companies should make a profit, but it should be proportionate. I believe that the gas should stay here. I have no financial interest my interest is the public good."

Deri: Assess the gas plan

Minister of the Economy and Development of the Negev and Galilee Aryeh Deri is demanding changes in the gas plan to be brought before the cabinet for approval after the public hearing. Deri welcomed the decision to present the gas plan to the public. In a discussion in the Ministry of the Economy, he said today, "I'm glad that the decision was taken to make the gas plan absolutely transparent to the public, and of course to the Knesset. I'm convinced that after the agreement is presented to Israelis and the entire world, it will be easier to conduct public discussion on this matter, which has broad security, political, and economic consequences for all residents of the country."

Published by Globes [online], Israel business news - - on July 2, 2015

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

Gideon Tadmor  photo: Uria Tadmor
Gideon Tadmor photo: Uria Tadmor
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