Israel's Natural Gas Policy Report Delayed, Sparks Debate on Reserves
An inter-ministerial committee, two years behind schedule, is set to release its final conclusions on Israel's natural gas policy. The recommendations, headed by Ministry of Energy Director-General Yossi Dahan, are expected to be presented to the government for approval, likely after upcoming elections. However, the next government is not bound by these recommendations, and the gas market has already seen significant developments, including a major export deal with Egypt, without a clear policy framework.
The committee, established in February 2024, was mandated to review export quotas and domestic needs every five years, a process that should have concluded in January 2024. The delay stems from deep professional disagreements between government ministries, particularly between the Ministry of Energy and the Budget Department of the Ministry of Finance. The Finance Ministry has criticized the Energy Ministry's economic models, arguing they underestimate future domestic demand to favor larger export volumes for gas companies. Some officials from the Budget Department even boycotted committee meetings.
The core issue is the amount of natural gas to be reserved for domestic consumption. The Ministry of Energy is expected to recommend reserving 440 billion cubic meters (BCM), while the Budget Department advocates for increasing this to 515 BCM until better alternatives are available, before potentially reducing it back to 440 BCM to allow for exports. The committee is also expected to propose an "oversupply" mechanism to foster domestic competition and postpone potential daily shortages.
Geopolitical and economic shifts have further complicated the situation. Security concerns during recent conflicts led to temporary shutdowns of offshore gas platforms, highlighting the vulnerability of the domestic supply. Meanwhile, gas partnerships have secured long-term export deals with Egypt worth tens of billions of dollars during a period of global energy market volatility, without definitive national export limits being set. This regulatory uncertainty has also impacted domestic negotiations, such as the stalled supply agreement between the Israel Electric Corporation and the Tamar gas field partners, which is now in arbitration.
The Israel Electric Corporation has warned that large export permits without securing domestic supply could drastically increase gas prices, leading to higher electricity tariffs for consumers. Furthermore, economic forecasts relied upon by the committee have been disrupted by a massive surge in demand for data centers driven by the AI industry. This has led to a freeze on new grid connection requests, and official reports warn of a significant risk of electricity shortages by 2036 due to delays in transmission infrastructure development. Despite these warnings, the Ministry of Energy has launched a new offshore gas exploration tender, promising future exports before official rules are finalized, leaving a critical economic sector without a stable policy.
