Standing up to Israel’s Gas Monopoly

Israel currently pays one of the highest natural gas prices in the world. While spot prices in Europe have dropped below 4$ – for gas imported from Russia and the US – the Israel Electric Company pays over 6$ for gas, though it is from a domestic field, “Tamar”.

The reason is that while most of the global natural gas market has a significant element of competitiveness, the Israeli natural gas market is a citadel of protected prices. This reality has clear winners: the monopolistic owners of the natural gas concessions, centered on the US energy firm Noble Energy and the Delek Group, controlled by Israeli business tycoon Yitzhak Tshuva. The monopoly received government sanction in 2015 through the Natural Gas Framework, which bypassed the objections of Israeli regulators such as the anti-trust commissioner.

The 2015 Natural Gas Framework (“the Framework”) essentially eliminated the chance of competition for several years, keeping the monopoly in control of the two largest fields – Tamar and Leviathan – for 8 years. Since the commencement of production of natural gas from the Tamar field in 2013, the companies have earned profits of over 6.7$ billion, more than twice their original investment. The Framework gave significant tax benefits delaying most of the taxes until 2021, when profits are expected to reach over 9$ billion, though most of the investments were conducted with virtually no risk.

That the Framework works in the favor of the gas monopoly is not surprising. In the years leading up to the Framework, Noble Energy and Delek worked overtime to lobby their position. Noble Energy was supported by Sheldon Adelson, as well as Bill Clinton. Delek hired several former regulators and ministers as lobbyists.

However, there was a chink in the monopoly’s armor which took everyone some time to notice: Egypt.

Egypt and Jordan are the only countries connected to Israel by natural gas pipelines. This means that natural gas can be marketed between the states without requiring the costly liquefaction process, which is required to market via tankers. Between 2008 and 2012, Egypt sold cheap natural gas to Israel – around half the price we are currently paying the monopoly. This ended in 2012 with the rise of the Muslim Brothers in Egypt, alongside the dwindling of their natural gas reserves. In 2015 Egypt was a gas-importer with a significant energy deficit; the Framework therefor ignored her.

All that has changed. Egypt discovered huge reserves in the past few years  and in 2018 reached energy self-sufficiency. In the past year, Egypt has exported significant quantities of gas to Jordan and Europe. Egypt’s production may continue to increase dramatically, as it signed several gas exploration deals with energy giants such as Exxon-Mobile and Shell. Alongside the improved security in the Sinai, as well as improved bilateral relations, Egypt exporting gas to Israel is the expected economic option, as Israeli prices are higher.

It is unsurprising, therefore, that Noble Energy and Delek moved to acquire EMG, the Israeli-Egyptian firm controlling the single pipeline between the two countries. They justified their move as part of their efforts to export gas to Egypt; however, as Israeli natural gas prices are much higher than Egypt’s, it seems more likely that the deal is intended to stifle competition from the burgeoning Egyptian gas market. Buy the pipeline, and shut out all rivals.

In this context, the crowd-funded public advocacy organization Lobby 99 lobbied the Israeli Competition Authority to prevent the EMG pipeline deal. Unfortunately, the deal was authorized, though with certain limitations. Analyzing the limitations together with Israel’s leading anti-trust experts has shown that they have more holes than Swiss cheese. The result of the decision is de-facto complete control for the Gas Monopoly of the pipeline, eliminating the chance of competition. The Lobby therefore launched a campaign to support legal action to appeal the Competition Authority’s decision, which was formulated in complete coordination with the energy corporations.

Israel received a huge gift in our natural gas reserves. These had the potential to revolutionize our economic and strategic standing, becoming self-sufficient in energy, creating a tax source, and lowering prices across the board. Instead, this gift was squandered on corporate greed with lobbyists ensuring high prices and low taxes. The EMG gas deal is the gas companies’ natural next step: quash any competition before it ripens.

It’s time to tell the energy companies that we have had enough. It’s time to take them to court, and Lobby 99 is doing just that.