Israel's Gas Market Faces Monopoly, Uncertain Reserves Ahead of Elections
Israel's Ministry of Energy and Infrastructure has released the final report from the Dayan Committee, an inter-ministerial body tasked with examining natural gas market policy and enhancing energy security. The comprehensive report maps Israel's supply and demand balance until 2048, proposes policy tools for energy security, aims to increase competition, and addresses natural gas export mechanisms.
However, the report's release just before elections means the current government cannot enact binding decisions based on its recommendations, leaving these critical energy issues for the next government to resolve. The incoming administration will need to decide which recommendations to adopt and how to address outstanding issues, including critical views from the Treasury, the Competition Authority, and the Environmental Protection Ministry.
A major structural problem highlighted is the severe market concentration, with Chevron's U.S. company controlling approximately 90% of Israel's natural gas reserves through its ownership of the Leviathan and Tamar fields. Despite calls for structural separation to break Chevron's hold, the report offers no operational recommendations. Nevertheless, pro-market factions within the government, notably the Competition Authority and the Budget Division, clearly support measures to reduce this concentration.
The report also outlines a mechanism for export permits where the Ministry of Energy must update an inter-ministerial forum but is not bound by its opinions, prioritizing exports over ensuring domestic supply expansion and long-term gas availability for Israeli citizens.
Furthermore, the report relies on the optimistic assumption of future gas discoveries, a notion contradicted by the lack of active exploration for three years and the low probability of finding another massive field like Leviathan. The current tender processes are slow, and even a new field developed soon would not be operational for seven to ten years. Building policy on the uncertain possibility of finding more gas, without adequately considering the risk of not finding it, is seen as a gamble with energy security.
The report's delayed release, nearly two years late, means strategic export deals to Egypt and significant export permits from Leviathan and Tamar have already been finalized, limiting the state's practical tools to alter these agreements. Despite these limitations, the report's late publication presents an opportunity for the next government. It reveals deep internal disputes, particularly between the Ministry of Energy and other committee members, on issues like ensuring a surplus of local supply and raising the threshold for domestic reserves. The next government can adopt stricter versions of these recommendations to rectify shortcomings in the final report.
