Israeli Minister Calls Gas Producers to Reduce Prices

Israel's environment protection minister, Avi Gabay, called January 28 for Israel's natural gas producers to reduce the price they charge Israeli customers. The minister convened a press conference following an announcement by the CEO of Phoenicia Flat Glass Industries, Eran Heimowitz. His company makes float and low-iron float glass, who said fuel oil was much cheaper than gas.

Just three years ago, when oil prices hovered above $100/b, the manufacturer faced a bankruptcy. In a rapid operation it was connected to the natural gas grid and began burning natural gas about a year ago.

However Heimowitz, said he asked the permission of the environment protection ministry to return to fuel oil because the gas price as it was set in the natural gas regulatory framework makes its use unprofitable compared to fuel oil. "I am still thinking that the whole country has to be linked to natural gas however it is impossible that the price would be so uncompetitive, not compared to the world and not compared to other energy materials. That is problematic," Heimowitz was quoted as saying in The Marker, a business daily.

Gabay, the minister, who was the only minister who voted against the framework at the cabinet, said that he already warned that the pricing of natural gas in Israel prevents expansion of its use. In the last few weeks, he said, that factories which still have not connected to the grid are happy about it since it increases the production cost.

"I call the companies and particularly to the Israeli shareholders: reduce the price – the market will develop and your sales would be better off. Reduce the price and Israelis would enjoy cleaner air."

Israel Electric Corp is the biggest customer for natural gas in Israel and its benchmark price is about $5.5/mn Btu. The price is linked to the consumer price index plus 1%, so the global plunge in oil and natural gas prices in the last 20 months has not affected the price of natural gas in Israel.

Ya'acov Zalel