Skip to main content

Prime Minister Ariel Sharon didn't blink before accepting a National Infrastructure Ministry proposition to let the Israel Electric Corporation construct a pipeline from offshore natural gas reservoirs to the shore.

Sharon, anxious to see the pipeline built, does not deal with minutae. He sees no problem with the project being run by the same company that is to be the one and only gas buyer.

The Natural Gas Law is founded on a certain balance, and aims to prevent the three players - the supplier, the distributor and the consumer from becoming a monopoly. The supplier of gas may, under the law, own up to 26% of the company that will distribute it, and the consumer may not be the supplier or the distributor.

In theory, given the complications that have developd in the government's tender to build the pipeline, it should be canceled, even if that the IEC will have to wait another year or more to get its gas. But the fact that the IEC would end up paying for gas that it won't be using in the meantime, and that the delay could cost the taxpayer $50-$60 million a year, leaves the government with little choice but to go for the most expedient option.

One cannot argue against the fact that the IEC has the technological capacity and organizational ability to complete the project. Moreover, a company that the treasury tells us raises $1 billion a year, would have no difficulty in raising the necessary $350 million for a nice tidy earner that will reap dividends for many a year.

TheStreet Recommends

Okay, so the IEC has never laid a pipeline, unlike others such as the Mekorot water company. But people who know it say it can bring together the necessary brains and experts for the job.

But what are the dangers? The IEC as consumer of 70% of the gas will have a natural interest in being party to the infrastructure. Operating the pipeline, no matter for how short a time, will give it leverage against gas suppliers and other industrial consumers. A seasoned monopoly such as the IEC will not hesitate to use its monopsonistic power too.

Antitrust Commissioner Dror Strum has said in recent months that it there were no other choice, he would allow the pipeline to be built by any state-owned company - except the IEC.

But Strum cannot ignore the problems facing the government in its choice of operator of the project. Strum also sees the difficulties in awarding the operation of the pipeline to a government company, unproven in such complex work. All of which leads to the conclusion that the IEC may win the contract "temporarily". Easy for the government and great for the IEC. Only the consumer will end up paying.

It is Strum's duty to stop the IEC from getting its paws on the gas pipeline, using all legal tools at his disposal.