Israel Mulls Maximum Natural Gas Price Instead of Price Controls: Sources

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Israel’s Finance Ministry is considering setting a maximum price for natural gas instead of imposing price controls, Israeli energy industry sources said Monday.

The sources said that the maximum price being discussed by government officials is $5.50 to $6 per million BTU.

The move to set a maximum price in the domestic market comes only two weeks after Israel’s Public Utilities Authority (Electricity) rejected long-term agreements between the Tamar consortium and several private power producers saying that the price of gas was too high.

However the maximum price under consideration is higher than that paid by state-owned Israel Electric Corp and on par with the average price paid by private power producers, but lower than the price paid by industrial users.

The energy industry sources said that a maximum price is deemed by the finance ministry preferable over imposing price controls as such a move could have a serious impact on future investment in the gas sector.

The setting of a maximum price is also viewed as a means of enabling industrial users to benefit from lower energy costs.

The PUA late last month cited three agreements signed last year with Rapac, which is building two private power plants at Alon Tavor and Ramat Gavriel in northern Israel, and a power plant being built at Soreq near Israel’s southern Mediterranean coast by the owners of a huge desalination plant.

The sources said the regulator was opposed to the price structure in the agreements, which included an automatic increase in the base price.

The three agreements signed March last year with the Tamar consortium (which includes Noble Energy Inc, Delek Drilling, Avner Oil and Gas, Isramco and Alon Gas Exploration) were for the supply of 7.8 billion cubic meters of gas over 15 years to the three power plants.

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