Israel's Gas Market Consolidation: Regulator Rejects Forced Sale, Favors Sales Separation

A special Israeli committee has decided against forcing Chevron to sell its stakes in the Tamar and Leviathan natural gas fields, opting instead for measures to increase competition within the existing structure. The "Dayan Committee," an inter-ministerial body tasked with examining the natural gas market's policy, concluded that while Tamar and Leviathan control 66% of the domestic market, a forced divestment by Chevron is not the recommended solution.

Instead of a change in ownership, the committee proposes implementing a "separate sale" obligation for Leviathan starting January 1, 2030. This means partners in the field will be able to sell gas separately, potentially increasing commercial offers. For Tamar, the recommendation is to ensure partners can sell gas independently without contractual restrictions. The committee also suggests incentivizing other fields to adopt separate sales.

The committee's broader strategy focuses on increasing supply by encouraging investment in new gas exploration and development. Recommendations include promoting seismic surveys, offering economic incentives for exploration, and easing the connection of smaller fields to the national grid. This approach aligns with the view that increasing supply and adding new fields is the key to genuine competition.

While the committee acknowledges the market concentration, it prioritizes regulatory certainty to avoid discouraging investment in exploration and production. The decision to maintain existing ownership structures and focus on sales rules, incentives, and new investments reflects a balanced approach. The committee also addresses the economics of smaller discoveries, proposing cost-sharing for connection and complementary incentives for exploration, aiming to broaden the supply base even if new finds are smaller than Tamar and Leviathan.

Significant investments are ongoing, such as the $2.36 billion expansion project for Leviathan, expected to increase its production capacity. The committee's recommendations on export permits will consider the impact on domestic competition and prices, as well as the contribution to exploration and production investments. The gas sector is a growing source of state revenue, with cumulative royalties from Tamar, Leviathan, and Karish exceeding 15 billion shekels.