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Yossi Maiman, President, Merhav Group

 

 

I want to talk about the gas market in Israel.  Let’s start with a clear declaration: Egypt recently made the strategic decision to cooperate with Israel, because this is in Egypt’s interest.  And, incidentally, this interest is mutual. 

Israel needs 200 million cubic tons of gas.  How will it obtain them?  Egypt committed to provide 140 million cubic tons.  Yam Tatis has about 30 to 35 million cubic tons, most of them sold.  British Gas has a similar amount, also sold.  In any case, Egypt is becoming a central player in the Israeli market.  If we buy one billion dollars from Egypt, don’t forget that this means Egypt is selling us 1 billion –our spending is their income.  Egypt’s oil reserves are diminishing, but its gas reserves are increasing.  The Egyptian government is currently controlling over 1,800 billion cubic meters of proven gas reserves and about the same amount of potential reserves.  Egypt produces today about 60 billion cubic meters a years, so we have another 30 years to go without even touching the emerged part of the iceberg.

There is an iron rule: the shorter the distance between the buyer and the seller, the higher the price for the seller and the lower the price for the buyer.  When we look at the geographic element and at the price of energy in the world, the average price of natural gas today is about $6.5, and the cost of transportation and storage adds up another $2.5.  The small distance with Egypt means that Egyptian gas will always be cheaper.  We are in favor of diversifying suppliers, and we are in favor of price competition, and we are in favor of transparency in the decision process.  And indeed there are efforts to bring British Gas to Israel, and Israel is trying very hard to lower the prices of British Gas.  And this is because we want to secure our gas supply, but let’s not forget that the supply source of British Gas in the Gaza Shore, and so this may not be very useful in terms of securing our supply.  As a state, we’ll have to build up reserves.  If the Treasury wouldn’t spend its money in banks but in Yam Tatis and in the extraction of more natural gas from Egypt to build up our reserves, the return on investment could only benefit.  I am in favor of bringing in Palestinian gas through clear tenders.  Ultimately, what will secure our gas supply in the link between countries.  We have peace with Egypt.  We had many disputes with the Arab world since the peace with Egypt, but not a single shipping of oil was ever stopped.  Our peaceful relationship with Egypt will be based on the fact that Israel will import one billion a year, and on the fact that the gas that Egypt sells us will be 30% cheaper than European gas –and still they’re getting the best price possible as a seller.

Another element in the viability of peace with Egypt is the QIZ agreement.  The QIZ agreement has created hundreds of thousands of jobs in Egypt.  So this interdependence adds up to the one billion dollar annual transaction for gas. 

One last thing.  Egypt is moving toward the production of gas rather than oil.  The Egyptians have invested billions of dollars in lowering the costs of gas extraction.  They know that any damage in the relation with Israel will have a domino effect. 

And two last comments: I’d like to thank the Minister of National Infrastructures for his great work.  His Ministry has undertaken the right steps to facilitate and encourage foreign investments in Israel in the field of energy.  And the second thing is that I am very proud in the gas project with Egypt and with the fact that this deal will strengthen peace between Israel and Egypt.      

 

 

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