"The more that gas suppliers set reasonable prices, the chance that Ministry of Finance will control them is reduced," a Ministry of Finance official said in response to a request by the public prices committee for bids for a price control mechanism on natural gas. The ministry's threat to impose price controls is part of its effort to support Israel Electric Corporation (IEC) (TASE: ELEC.B22) in its negotiations with Yitzhak Tshuva-controlled Delek Group Ltd. (TASE: DLEKG) and its partners in the Tamar gas license.
In these talks, Delek and Noble Energy Inc. (NYSE: NBL) agreed to cut the price of gas to below $6 per million British Thermal Units (BTU), but the Ministry of Finance's budget department wants the price cut further, to the level IEC agreed on with the Tamar partners in January 2010, before the Sheshinski committee and before the disruption in gas deliveries from Egypt.
The Ministry of Finance and Ministry of National Infrastructures' joint prices committee has asked for responses from consumer advocates, private power producers, natural gas customers, and the gas companies by August 7.
A Ministry of Finance source told "Globes", "This is a complicated professional procedure that requires us to deal with questions such as whether price controls will be imposed on types of transactions, or only on large, long-term contracts." The ministry believes that the prices committee will reach a decision a month after the hearing, by mid-September.
Experts, including Natural Gas Authority director Shuki Stern, a member of the prices committee, have said that they strongly disagree with any price controls, but that they would impose them if there was no choice.
The letter of intent signed in January 2010 between IEC and the Tamar partners mentions the purchase of 2.8 billion cubic meters of gas over 15 years at $4.50 per million BTU, a price that the Ministry of Finance says is equivalent to $5.14 today. IEC has since decided to increase its gas purchases from Tamar.
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