Sheshinski. 'Public does not receive its proper part'
Photo: Noam Hershkowitz
Steinitz. 'Significant natural resource'
Photo: Noam Hershkowitz

Israel drops plan to hike royalties on gas fields

Finance Ministry advisory committee recommends raising government's take on oil and gas revenues, upsetting energy exploration companies

Finance Ministry advisory committee has dropped a proposal to hike royalties paid by Noble Energy, a US company developing natural gas fields off Israel's Mediterranean coast, instead cancelling tax incentives.


The panel, in its intermediate report, recommended keeping Israel's royalty rate at 12.5% while adding a "progressive tax" on companies that ranges from 20 to 60%, depending on production yields.


The government formed the committee in April to reexamine its tax and royalty policy after large commercial amounts of natural gas were discovered in Israeli waters last year.


The committee's chairman, Hebrew University economist Eytan Sheshinski, said that much of the world has raised its share of revenues from natural resources, while Israel has maintained the same level since 1952.


"Without a doubt, the public does not receive its proper part of the revenues from natural resources," Sheshinski said at a news conference in Jerusalem.


The new tax would only come after companies recoup 50% of their initial investment, Sheshinski said, and would apply to the larger gas fieldsafter eight years, and to smaller fields after 15 years.


Finance Minister Yuval Steinitz told a news conference Wednesday that instead of hiking royalties, he's recommending canceling a 27.5% tax incentive the companies enjoy. They would be taxed on a sliding scale depending on levels of investment.


Steinitz said the huge gas fields are "the biggest and most significance natural resource in Israel's history."


Central Bank Governor Stanley Fischer in a statement said he "welcomed the recommendations, that express the need to increase the government take in gas and oil discoveries".


A final panel recommendation is due by the end of year and any decision will have to pass a vote in parliament.


'Black day for Israel's citizens'

Energy companies who have spent years exploring Israel and its territorial waters say that any change would constitute a breach of contract and scare off future investors.


Texas-based Noble Energy and its Israeli partner Delek Energy, who shook the region's energy sector with the discovery of natural gas reserves in the eastern Mediterranean, are crying foul.


"We think that these conclusions are a black day for the citizens of the state of Israel," Delek official Yoram Turbowicz told Channel 2 television after the announcement. "I am convinced that these recommendations will not be accepted."


Noble and Delek, together with a consortium of smaller companies, made the largest natural gas find of 2009 at the Tamar field, some 90 kilometers (56 miles) off the Israeli shore.


Tamar's reserves are estimated at about 8.4 trillion cubic feet, and the group says a second field nearby, Leviathan, could potentially be twice as big. Officials have projected those two sites alone could gross about $4 billion a year.


The Associated Press contributed to this report



פרסום ראשון: 11.11.10, 10:53
 new comment
This will delete your current comment