What the gas failure tells us

Amiram Barkat

If it takes years to connect eight factories to natural gas, when will we see the Tel Aviv Light Rail?

If there is one matter on Israel's economic agenda about which there is no dispute, it is the need to connect Israeli factories to natural gas. Everyone's in favor. Everyone talks about it. Everyone wants it to happen as soon as possible. Even Governor of the Bank of Israel Karnit Flug troubles to mention in her speeches that connecting factories to gas is one of the economy's main growth engines. So why isn't it happening? How is that, in two years, only eight factories out of 2,000 have been connected up, when, according to the projections, by now there should have been dozens?

The answer to this question, set out in a "Globes" investigation, can tell us a great deal about the difficulty of executing large and important projects, about the gap between politicians' bombastic declarations and the bureaucracy's meager capabilities, and about the immense difficulties that end-users, entrepreneurs and business owners, have to deal with.

The same themes keep repeating themselves: endless disputes between regulators seeking to shrug off responsibility, frequent regulatory changes that drive the market crazy, and a basic lack of understanding of the constraints within which industrialists operate.

The price gaps between gas on the one hand and diesel and fuel oil on the other, which have narrowed considerably lately, are not a sufficient motivation to persuade owners of small and medium-size industrial plants to invest the huge sums required to hook up to the natural gas network, to convert factories, to procure the requisite equipment, and to pass certification checks. Someone with a small or medium-size factory, whose planning horizon does not extend beyond a year or two, is not going to rush to sign a 15-year gas purchase agreement.

Had the state understood this at the outset, it would have taken on itself the connection and conversion expense, and would have simplified regulation. In fact, the problems are solved by the fire-fighting method, and at a desperately slow pace. If it takes years to connect a few factories to natural gas, one can only guess how long it will take to build a light rail system in Tel Aviv.

Published by Globes [online], Israel business news - www.globes-online.com - on January 26, 2015

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

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