Yachimovich slams ‘underhanded’ gas export decision

Opposition head Shelly Yachimovich on Thursday blasted a government decision to export some 40 percent of Israel’s natural gas, saying that it would benefit Israel’s gas tycoons to the tune of NIS 350 billion (some $100 billion) in profits while denying the public the benefits of long-term energy independence.

Labor’s Yachimovich told Israel Radio that the decision was made “without any form of legislative process and without the public knowing what was happening.”

The decision to export nearly half of Israel’s natural gas reserves in the coming years was announced on Wednesday by Prime Minister Benjamin Netanyahu, Minister of Energy and Water Resources Silvan Shalom, and Finance Minister Yair Lapid.

“The State of Israel received a gift from nature in large quantities of natural gas. After a series of long meetings, we have jointly decided to significantly increase the amount of gas for Israel’s use. This will supply our needs for 25 years. This is a balance between the need to ensure energy sources for Israel’s citizens and the need to export gas which will generate revenue for use by Israel’s citizens,” said Netanyahu.

Yachimovich described the decision as “underhanded opportunism in the night,” and said it would affect future generations.

She also stated that exporting the estimated 540 billion cubic meters of gas would mean profits of NIS 350 billion for local and international gas giants, including the heads of Noble Energy, Delek Drilling, Avner Oil Exploration, and Isramco. On Wednesday, she threatened to petition the High Court of Justice in the matter.

But Minister Shalom described the decision as “correct and balanced.” According to him, exporting less than what was recommended by the committee tasked with informing the government on the issue would cause the companies invested in the project to stop drilling.

He said that energy sector revenues would lower the cost of living for Israelis, by reducing the cost of electricity and water and lowering the prices of consumer goods.

Shalom also told Israel Radio that the sale of natural gas to “our neighbors” would strengthen Israel’s standing in the region.

The 40% of gas discoveries that are slated for export over a 25-year period (assuming all the projected finds turn into actual gas resources) are estimated to be worth about $60 billion, according to Netanyahu and Lapid.

“We want to get this approved very quickly. We certainly do not want to be like the countries that delayed in making decisions and were left without gas in the end,” said Netanyahu on Wednesday. “Instead of the gas staying in the ground, or under the sea in our case, we want to begin to produce gas and to fill the state’s coffers with billions of shekels that will allow us to ease the economic burden on the public, and, of course, to see to our important national needs.”

Environmental Protection Minister Amir Peretz (Hatnua) said Wednesday that Israel must retain the first 600 billion cubic meters of gas. The current projected discoveries amount to about 950 BCM. Other MKs demanded that the cabinet keep out of the decision-making process altogether, and leave it to the Knesset.

In Tel Aviv, several dozen social protesters took to the streets Wednesday night, blocking roads and waving signs reading: “Don’t give gas to the tycoons” and “Gas exports = national suicide.”

What to do with Israel’s natural gas reserves was the subject of lengthy deliberations by a committee headed by Shaul Tzemach, the former director general of the Water and Energy Ministry. In late 2011, Tzemach was appointed to head an inter-ministerial committee to hammer out a policy on how best to use Israel’s new-found natural wealth. The committee included members of the Finance, Environment, Economics, Defense and other ministries.

The committee was faced with pressure to allow the companies that found the gas — including Noble Energy, Delek Drilling, Avner Oil Exploration, and Isramco — freedom to export large amounts, countered by demands by social groups to keep most of it for local consumption. In the end, the committee worked out a compromise: The first 450 BCM would be held for Israel’s use, and companies could export up to half of any greater amount in proven reserves. The proposal would enable the drilling companies to recoup their investment, while providing Israel with up to 25 years of gas reserves. After protests by groups opposed to gas exports, Shalom announced several weeks ago that he would seek to lower the amount to be exported to between 39% and 43% of Israel’s reserves.

The Wednesday announcement — likely to become official policy, when the cabinet votes on the recommendations Sunday — did not sit well with at least one major foreign player in the Israeli gas business. In a deal struck late last year, Australia’s Woodside Petroleum announced it would buy 30% of the Leviathan gas field from the consortium that owns it now, led by Noble Energy and Delek Drilling, in a deal estimated to be worth $1.3 billion. But with Israel’s failure to come to a final decision on how much gas it would allow for export, officials in the company began expressing impatience — to the extent that, according to reports, Woodside had decided to pull out of the Leviathan deal if a decision was not made by the end of June.

Now that a decision has been made, though, Woodside has another reason to back out of the deal. Speaking to The Times of Israel at an event featuring Australian gas industry officials, a top Australian gas industry executive said that Woodside expected to invest and earn money based on the recommendations set by the government-appointed Tzemach Committee. The government’s failure to support the decision of its own committee, the executive said, sows doubts in the minds of investors — leading them to suspect that the government could change its mind again, in response to pressures.

That kind of “flip-flopping” is bad for business, said the Australian energy executive. “Even so, Woodside thinks Israel is a good place to invest. At least Israel has a policy infrastructure and an objective way to appeal decisions. Many of the countries where new gas fields are being found don’t even have that.”

Woodside is the first large foreign company (other than the exploration companies) that wants to make a deal for Israel’s gas, and is a major player in the natural gas industry — so its reaction to the decision is being watched carefully by other potential customers and investors.