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Israel: More gas customers, please

The country has invoked new emergency regulations as offshore pipeline repairs reduce domestic supply—but is it a sensible move?

In April, the Israeli government passed new emergency times regulations initiated by the Ministry of Energy, based on the Gas Law of 2002. These provide extensive, and hitherto untested, powers to the ministry in the event of an emergency in the domestic natural gas market.

A state of emergency can be declared as soon as "the hourly demand for gas in any given hour exceeds the maximum amount that can be supplied". The regulations empower the ministry to decide on how to allocate the gas available.

These emergency measures were invoked on 7 September for a six-week period between 19 September and 31 October on the grounds that maintenance work would be carried out on the two 150km (93-mile) offshore pipelines leading from the Tamar reservoir to the platform. During this time, gas supply to the Israeli market will be reduced by about 50%.

To cover the shortfall, Israel will be scrambling for imports of liquefied natural gas. But LNG is far from being a satisfactory solution as the feedgas itself can only be sourced from a limited number of countries due to the need to meet the specific quality of Israel's electric turbines. Thus far most, if not all, cargoes have been sourced from faraway Trinidad and Tobago.

In addition, the floating storage regasification unit (FSRU) is moored to a buoy 10km offshore Hadera in the north of the country. Israel is the only country in the world where the offloading of LNG is done ship-to-ship in mid-seas, adding complexity and limiting the number of entities able to undertake this task. In 2016, Israel imported only 366m cubic metres of gas, some of which was used for boil-off of the FSRU. Imported volumes of LNG are due to increase somewhat in 2017.

Enacting and then imposing such emergency time regulations is most unusual since peaks and swings of gas consumption in any one day are the norm and should in no way be a measure of the market having entered into a state of emergency. Also, rather than enacting such draconian regulations the authorities should be focusing on doing whatever is required to ensure that the market develops in an efficient and reliable manner.

This entails, among other things, ensuring there's sufficient demand for gas in the market to enable other discovered and not yet discovered fields to be developed. Local consumption in Israel is currently around 10bn cm a year (9.7bn cm in 2016 and estimated to reach 10.5bn cm in 2017). However, Israel already has 1 trillion cm of discovered gas and potentially twice as much in yet-to-be-found deposits. In order to ensure these indigenous sources can be developed, local consumption in Israel should immediately be increased by 50% or even doubled.

As much as 40% of electricity is still generated with imported coal and the country's transportation sector has yet to convert to using natural gas. A host of issues are impeding development. But the first step should be the establishment of more transmission and distribution infrastructure to bring gas to consumers.

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