Monday, June 24, 2013

 

Analysis:Israel's gas export plan slammed by public,hailed by experts

JERUSALEM, June 24 - The Israeli government has approved a plan to export 40 percent of the country's newly discovered natural gas resources in a move opposed by the public but applauded by experts.

"While the gas is a nature's gift to Israel, there is a need to compensate the private companies, who after years of exploration found the gas," Prime Minister Benjamin Netanyahu said during a cabinet meeting on Sunday.

Although 60 percent of the gas to be kept for the domestic market is higher than the 50 percent recommended by a ministerial committee last year, the government received harsh criticism from opposition figures who argue that Israel, which until the latest discovery lacked natural recourses, should reserve more gas for itself to improve the economy, especially after the nationwide unrest in mid-2011 that may affect energy flows into the country.

However, given the circumstances, the government made a good decision, pundits told, adding that it's hard to keep everybody happy, so there will always be some criticism.

One of those experts is Eytan Seshinski of The Hebrew University of Jerusalem, who told  on Monday that the government's move "all in all and in the broad picture is reasonable."

"The gas would be sufficient for about 25 to 30 years, which is a reasonable horizon," said the author of the Seshinski report, which formed the basis for Israeli government's policy on gas revenue.

On the same track is Amit Mor, CEO of Eco Energy, who said "the 40-60 division is a conservative decision, which preserves more gas for domestic use than previously planned,"

"The government decided to be on the safe side by allocating more gas for domestic use," the CEO of the economic consulting and investment firm added.

The explorers, a consortium of Israeli and American companies, will be taxed on the gas set to be exported, a measure that the government said would generate 60 billion U.S. dollars in tax revenue to be used in lowering costs of living.

During the cabinet meeting, Netanyahu stressed that the government needed to act fast so that Israelis would be able to benefit from the discovered gas resources, noting that it was also important to provide sufficient incentives for the explorers to develop the gas fields located under the Mediterranean Sea, 90 km off the Israeli northern city of Haifa.

Gas has come out of the smaller Tamar gas field, while export is expected to begin once the much larger Leviathan field operates sometime during 2016.

On the other hand, the explorers have been pushing the government to clarify its policy before the development of Leviathan takes place.

Seshinski argued that the 60-40 division would not deter future explorations since "Israel will have an adequate supply of gas and export serves to balance the various interests."

For his part, Mor said the decision would not affect the domestic gas price, so Israelis could continue to look forward low energy costs in the future, noting that "compared to Europe, energy prices in Israel are much lower."

"While the decision means that less gas will be available for exportation and consequently less revenue for the exporters, we hope that much more gas would be found in the future," He added.

While crude oil can easily be transported by tanker ships, natural gas usually requires a network of pipelines and export deals are often signed for longer periods of time than oil.

Speaking of possible export markets, Dr. Brenda Shaffer of the University of Haifa said that neighboring countries are far more likely destinations than, for instance, the European market.

"Probably the most viable export will be to Jordan at first and then to Egypt's Liquefied Natural Gas (LNG) facility," Shaffer added.

LNG can be shipped and thus can avoid losses caused by sabotage to pipelines, which halted Egypt's export of oil to Israel.

One option often mentioned is the possibility to export the gas to Europe in pipelines via Cyprus, but Shaffer said that the economic viability of this option "depends also whether new resources will be found."

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