Energy Conference in Israel Becomes Arena for Debating Natural Gas Deal with Egypt

Nimrod Novik addressing the Israel Energy and Business Convention 2010

Nimrod Novik of the Merhav Group  was not pleased by the frontal attack waged by Delek’s Yoram Turbowitz at an energy conference in Israel this week.

The Israel Energy and Business Convention 2010 held this week in Ramat Gan addressed a range of energy-related issues and featured keynote speeches by several government ministers. Of particular interest to the Green Prophet, however, was the opening plenary session of Day 2, entitled “Regional Cooperation in the Fields of Energy and Infrastructure.” The conference program promised that “business executives and representatives of the countries in the region and international organizations will attend the session.” But after arriving at the conference, it was disappointing to discover (and indicative of the current political situation) that the only country in the region that was represented on the panel was Israel.

A more apt title for the session might have been: “Domestic Squabbling over Regional Cooperation” – because most of the session involved a verbal “ping-pong” (as one of the panelists described it) between competitors in the natural gas market regarding Israel’s procurement of natural gas from Egypt.

Under an agreement first reached in 2005 and subsequently amended, Egypt is committed to selling billions of cubic meters of natural gas to Israel via East Mediterranean Gas (EMG), an Egyptian company in which the Merhav Group, an Israeli company, holds a 25% stake. Meanwhile, a large reservoir of natural gas was discovered off of Israel’s shores last year. The Delek Group, an Israeli partner in the international consortium that made this find, is now waging a legal and public battle against what it describes as preferential terms offered to EMG.

Turbo vs. The Blazer

Yoram Turbowitz, formerly chief of staff to then-prime minister Ehud Olmert and currently the chairman of Delek Energy Systems, complained at the energy conference that a 20-year tax exemption Israel granted to EMG effectively discriminates against Israeli gas providers who do not enjoy the same tax-exempt status. “EMG should be subject to taxation,” he declared.

Turbowitz also suggested that Egypt is a less reliable source of gas: It has experienced difficulty in meeting its own domestic demand for natural gas and faces growing internal opposition to the gas deal with Israel. In fact, Turbowitz said, instead of importing gas from Egypt, Israel can now become an exporter of gas to Egypt. “But equal conditions must be applied,” he emphasized.

Nimrod Novik, formerly a top advisor to then-prime minister Shimon Peres and currently a senior vice-president at the Merhav Group, listened politely to Turbowitz’s tirade. When it was his turn to speak, he tucked his prepared notes on regional cooperation into his blazer, saying that it would take at least 20 minutes to set the record straight. (As seen in the picture above , Novik, once known as one of Peres’  young “blazers,” still favors this form of attire.)

“EMG is an Egyptian company and pays taxes in Egypt,” he said, explaining that these taxes come after the Egyptian government already takes a 75% share of all gas produced in Egypt. “So as long as the tax isn’t this high in Israel, there is no preferential treatment for Egyptian gas,” he explained.

‘The most significant regional program’

At the end of the session, Amit Mor, co-CEO of the Eco Energy consulting firm that organized the conference, said he was aware that some people in the audience were disappointed that the session did not focus on regional cooperation as planned. However, he noted, the debate between the Delek and Merhav executives focused on “the most significant regional program in the field.”

Image via Yair Kachel PR

See related stories on the Green Prophet:

Egyptian Gas Exporter Given Israeli Tax Exemption in $6 Billion Deal
Discovery of Natural Gas in Israel is a Game-Changer
Natural Gas “War” Between Israel and Lebanon Could Lead to a “Drill Race”

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