Israel Gas Stocks Tumble After High Court Opens Door for Lawsuit

  • Gas companies are worst performers on benchmark TA-35 Index
  • Court allows suit to proceed against ‘monopolistic’ gas prices

Israeli gas stocks were headed for their biggest losses in more than three months after the High Court opened the door for a future lawsuit against the firms that sell fuel to the country’s largest energy consumer.

The Tel Aviv Oil & Gas Index fell as much as 2.2 percent, and gas companies were among the worst performers on Israel’s benchmark TA-35 Index, after the court rejected a request by the partners in the Tamar natural gas field to dismiss a class-action suit claiming the companies charged unfair and monopolistic prices.

"It’s never good for the gas companies when prices become a public issue," said Noam Pincu, an analyst at Psagot Investment House Ltd. "It means the companies have to justify the prices they charge for the umpteenth time."

Widespread anger over the cost of living in Israel has forced politicians to seek ways to lower household electricity bills. The main focus of frustration has been the contract between Israel Electric Corp., the state-owned utility that provides the majority of the country’s power, and the firms who operate the Tamar field.

Moving to Gas

Israel increasingly has moved away from coal since the Tamar reservoir came online in 2013. Natural gas now generates about 60 percent of the country’s electricity, and the government is targeting 82 percent by 2025. Tamar supplies about 90 percent of the 9 billion cubic meters of natural gas Israel consumes a year, according to a BDO Ziv Haft report in June.

The government instituted new policies last year to tear down what critics considered the monopolistic position of the two dominant players in the country’s natural gas industry -- Delek Group Ltd. and Noble Energy Inc. Israel forced the companies, which held the biggest stakes in the largest gas fields, to sell down their holdings in Tamar and two smaller reservoirs.

"When the gas framework was approved, I said that its irrational elements would be dismantled," Avi Gabbay, head of the opposition party Labor, said on Twitter. "That’s happening today to the greatest injustice within the framework -- the price."

In an emailed statement, the Tamar partners described the court’s ruling as purely procedural and predicted the suit would be thrown out. Psagot’s Pincu also said the lawsuit has little chance of success, and in any case would take years to litigate.

Delek Drilling LP, which owns a 22 percent stake in the Tamar field, posted the biggest drop on the TA-35, shedding 3.7 percent to 10.75 shekels as of 3:03 p.m. in Tel Aviv. The reservoir’s other major owners are Houston, Texas-based Noble with 32.5 percent, and Isramco Negev 2 LP with 28.75 percent.

— With assistance by Paul Armstrong

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