Gilo departure to hasten gas monopoly compromise


Delek will sell all its holdings in Tamar within six years, Noble Energy will reduce its holdings in Tamar from 36% to 25%.

"Anyone who thinks that it's possible to achieve a situation in which three different players operate the reservoirs and compete with each other is living in a dream world," a senior member of the team that formulated the compromise agreement leading to the resignation of Antitrust Authority director general Prof. David Gilo told "Globes."

Among other things, the compromise agreement requires Delek Group Ltd. (TASE: DLEKG) to sell all of its holdings in the Tamar natural gas reservoir within six years. Noble Energy, Delek Group's partner will be required to reduce its holdings in Tamar from 36% to 25%, and will be barred from marketing gas from the Leviathan reservoir to Israel. At the same time, the agreement leaves Noble Energy with control of both reservoirs as the company operating both of them.

Gilo's resignation is likely to pave the way for the signing of the agreement by his colleagues in the near future, with a decision to begin development of the Leviathan reservoir within six months, energy market sources believe. Gilo does not intend to leave his position before August, and is expected to continue his opposition to the compromise agreement until that time. In the absence of Gilo's consent, the Ministry of Finance and the National Economic Council are likely to exert pressure for cabinet approval of the agreement.

The Attorney General's position, as presented in the discussions by Avi Licht, his deputy, is that a cabinet vote is a legitimate measure that does not bypass Gilo's authority. The Attorney General intends to defend the cabinet in the event of a petition to the High Court of Justice against by arguing that Gilo's mandate is limited to considering matters relating to competition, and that that cabinet is therefore the proper forum for taking other national interests into consideration, such as preventing a reduction in state revenues and preserving Israel's foreign relations. It is alleged that continuing the processes of declaring an agreement in restraint of trade will undermine gas export deals.

In recent months, Gilo has disagreed sharply with his colleagues in the Ministries of Finance and National Infrastructure, Energy, and Water Resources and the National Economic Council about solutions to the problem of competition. The Ministry of Finance, which initially favored the idea of internal competition between the partners in each reservoir, changed its mind after realizing that this would require too much regulatory interference.

Gilo, however, argued that internal competition was a red line that must not be crossed. Among other things, he opposed the usual rebalancing compensatory arrangements between partners in a reservoir in cases in which some of the partners are unable to sell their relative share in the reservoir. Gilo asserted that such arrangements give the partners an incentive not to compete.

According to one of his colleagues, who pointed out that Gilo was demanding complex and unprecedented arrangements, Gilo answered, "We'll try it, and see whether it succeeds."

Published by Globes [online], Israel business news - - on May 27, 2015

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

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