Israelis look to the Dutch for gas guidance

Now a natural gas “power,” Israel has been shopping around for advice on how to best manage its newly-discovered resources, and it’s found a mentor in the Netherlands, a country that has its own natural gas resources, but has struggled to keep its economy diverse.

Last week, a delegation of senior Israeli officials, key policymakers and regulators from the gas sector visited the Netherlands to learn how the country regulates its gas industry and to understand the role of market players and institutional framework there, in order to enhance the development of the Israeli gas market.

The story of the Netherlands’ involvement in the Israeli gas business is not well known, but it’s definitely worth noting. The Dutch have gained extensive knowledge in the natural gas sector since the discovery of the first gas fields in their country in 1948. When Israel discovered large stores of gas off its coast a decade ago, the country sought advice on developing its resources. While many countries have natural gas businesses, the experience of the Netherlands was a natural fit. Like Israel, it’s a relatively small country with a developed economy, highly dependent on imports for its energy needs.

Cooperation began over a decade ago, as Israel’s first fields were developed. Dutch firms were involved in the construction of the Tamar platform, and helped show the Israel Electric Corporation (IEC) how to move from coal and diesel fuel to gas for electricity production. In addition, they helped the IEC set up its Gas Academy, which trains workers in metering and repair troubleshooting of gas-powered electricity systems. Dutch officials also helped the Israeli government set up its Natural Gas Authority (NGA), as well as the Israel Natural Gas Lines Ltd., the government-owned corporation that is setting up a national grid of gas lines.

On their visit last week, the Israeli delegation learned about the Dutch licensing procedures, taxation and supervision on health and safety in the upstream sector. Among the institutions the Israeli officials visited was NAM in Groningen, the exploration and production company for oil and gas, both on land and offshore, where they learned about the Dutch offshore regulations and gas storage. Executives from Gasunie, the gas infrastructure company that provides the transportation of natural gas and green gas in the Netherlands and northern Germany, elaborated on the company’s role in the European gas market and natural gas market development. And officials at gas broker GasTerra BV discussed the role of government regulation on the private market.

In many respects, the Dutch gas sector is similar to the Israeli gas sector, said Ambassador of the Netherlands to Israel Caspar Veldkamp. Both countries are ruled by a coalition government, which implies a great deal of horse trading before policy is established, and both traditionally expend a significant portion of their state budgets on social issues. While Israel’s proven gas reserves are slightly smaller than those of the Netherlands, the Dutch use gas to produce approximately 50% of the country’s electricity needs, similar to the percentage Israeli officials expect will eventually become the standard in Israel.

“It is important to share our best practices and lessons learned and explain how we faced the challenges that Israel is facing today,” said Veldkamp. “These Israeli officials went to the Netherlands to take a closer look at our best practices. I am confident they take some lessons home.”

The Israeli visit came at a time the government is seeking to reformulate its gas sales policy, after the Antitrust Authority recently demanded that Noble Energy and Delek Drilling sell off some of its holdings in Israel’s gas fields in order to reduce the oligopolistic effect that the two companies have had on the local gas market, where prices are higher than they should be, the Authority said.

That being the case, Israel has a lot to learn, and the Netherlands was a great place to do that, said Amir Levy, head of Budget Department at the Finance Ministry, who participated in the visit.

“The Netherlands offered us a great example of a comprehensive approach to an effective and efficient exploitation of natural resources. I hope this will strengthen further economic cooperation and exchange of experiences between our countries. I’m sure that the lessons we learned in the Netherlands will assist us in developing a competitive and a healthy gas market in Israel,” he said.