"Israel needs to set up a government natural gas company, and needs to do it now, while it is still negotiating with the gas companies," says energy consultant Noach Hager. "In contrast to a private company, a government company considers interests other than maximizing profits."
Hager cites Israel Electric Corporation (IEC) (TASE: ELEC.B22) as an example of a government company in Israel, and says that were it a private company, it might not supply electricity to the Palestinian economy, which owes IEC NIS 2 billion.
"But it continues to do so, because it is in Israel's interest to continue supplying electricity to the Palestinians. The same thing should happen with gas," Hager asserts.
"For example, the state could acquire the Karish and Tanin natural gas reservoirs, and decide that in view of the low demand for gas in Israel, it will develop them only several years from now. A private company will not be willing to do that. The state can also use gas as a political tool with the countries to which the gas is exported, just as Russia does in supplying gas to Ukraine."
According to Hager, a national gas company will feel more obligated to contribute to Israel's economy, beyond the royalties and taxes that private companies pay and in addition to increasing competition, a national gas company will feel more obligated.
"A government company will employ more Israeli workers, buy more from Israeli suppliers, and feel obligated to develop industries related to natural gas," Hager says. He adds that this will also avoid disputes about the anticipated state revenue from the gas. "Just a few months ago, the Ministry of National Infrastructure, Energy, and Water Resources announced a NIS 45 million discrepancy between what the government is asking for and what they received, and the gas companies and the state are now in a legal dispute."
Published by Globes [online], Israel business news - www.globes-online.com - on May 14, 2015
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