Article Library / 2016

2016 Annual Assessment

1     Natural gas may occur in deposits alone but is often found in petroleum fields. For years, it was considered a waste by-product of the latter and was flared off from oil recovery installations. The reasoning behind this practice is that petroleum, being a liquid, is relatively easy to transport and use. Natural gas, being almost entirely pure methane, is not a liquid except under very cold temperature and high pressure. This means that natural gas, if it is to be used as a fuel, must be transported either through fixed pipelines requiring massive investment and maintenance or through liquefaction and transportation as liquid natural gas (LNG), itself an expensive and technically challenging process.
2     The Tamar field’s reserves of approximately 250 BCM were proven in 2009 and Leviathan’s estimated 650 BCM in 2010. A third find of the same approximate size as the Tamar formation in the Daniel offshore field was announced in January 2016 but not yet proven at the time of this writing.
3     Both Lebanon and Syria have disputed Israel’s exclusive control, but without much grounding either in governing law or in an ability to act effectively upon their objection. Proven NG reserves also exist off Gaza and these have been formally delivered by Israel to the control of the Palestinian Authority. Hamas’s takeover of Gaza in addition to other factors has caused these deposits to be left unexploited.
4     Government-owned enterprises operate as businesses with the majority or sole shareholder being the government. Among the few such entities in the U.S. are the Tennessee Valley Authority and Amtrak.
5     The Daniel field, if proven to contain NG, would be the first to involve different Israeli partners, Isramco Negev and Modiin Energy (Haaretz, January 17, 2016; http://www.haaretz.com/israel-news/business/1.697863).
6     Sovereign wealth funds are portfolios of assets including both liquid reserves and acquired equity investments managed by a government authority. They may serve several purposes. They temper the fiscal volatility in the public’s portion of revenues from resource exploitation, provide “rainy day” reserves, or may be intended for use to serve strategic objectives by building up foreign or domestic assets in the form of investments. The common thread is to create a formal holding entity, the fund, as an independent buffer to reduce adverse financial consequences of potential boom (or bust) cycles by introducing a less short-term focus into decisions. The ability by the Treasury to draw upon these funds is usually deliberately highly restricted to ensure the maintenance of this insulation.
7     “Cabinet approves Sheshinski committee recommendations”, Haaretz, January 24, 2011.
8     There is a sliding framework that allows recovery of a multiple of the original investment before the full profit tax comes into play. There is also a royalty charge for each cubic meter of extracted NG and no depletion allowance, again unlike the U.S. but in accord with practice elsewhere.
9     The framework did require the Noble-Delek partnership to sell claims on other potential reserves.
10     The anti-trust law permits this under a national security exception. It did not help matters that former Minister Deri’s stepping down from his office was also the occasion for a swirl of political and budgetary horse trading. This is always true with ministerial adjustments, but the timing added fuel to opponents’ narrative of short-term advantage trumping long-term national interests.
11     The considerations go well beyond the commercial in as much as Israel’s NG would be most efficiently shipped via pipelines which themselves involve massive investment, long-term contracts and stable relations. A natural on-shore repository for Israel’s gas might be Cyprus, for example, but then relations with Turkey would come into play. The other likely pipeline terminus might be Turkey itself which would affect and be affected by a different dynamic and geopolitical calculus. It was not just the commercial players who felt the need to begin serious planning and engagement and therefore conclude a NG accord in Israel.
12     OECD (2011). An Overview of Growing Income Inequalities in OECD Countries: Main Findings, OECD Publishing, Paris.
13     OECD (2016). OECD Economic Surveys: Israel 2016, OECD Publishing, Paris.
14     The last two have been rising in their share of the total supporting economy, but without contributing to greater productivity, merely to the high cost of living. Before the communications sector was opened up to competition, it too exhibited the many ills of this economy and would have been included in it.
15     This familiar word in this case refers to profits in excess of what would be gained in a competitive market. “Accounting profits” are calculated as income received minus actual payments made. “Economic profits” account for the capital being used that could have been put to other, alternative uses. Thus accounting profits may be positive while the economic profits may equal zero once this opportunity cost of capital is considered. In an idealized competitive market this would be the case. Positive economic profits would be the equivalent of the term rent as used here.
16     OECD (2016), p. 10.
17     Solomon, Shoshanna, “High-tech boom may be over, Israel’s chief scientist warns,”, Times of Israel, June 30, 2016
18    Klingbail, Sivan and Shiloh, Shanee, “Bye, the Beloved Country – Why Almost 40 Percent of Israelis are Thinking of Emigrating”, Haaretz, Dec 15, 2012.
19     OECD (2016), p. 16.
20     See, for example, the discussion in “Federations and Foundations Take on Innovating and Sustaining”, Journal of Jewish Communal Service, vol. 86, nos. 1/2, Winter/Spring 2011, pp. 132-140.
21     For example, some tallies of Jewish community-supported institutions count hospitals, hospices and human service agencies operated under Jewish auspices. Yet, much of their funding is received from the federal government. Similarly, often little distinction is made between annual and capital giving.
22     Although there were considerable fluctuations during the period, the level of U.S. donations to Israeli organizations in 1975 stood at $1.15 billion and in 2010 they were $1.45 billion (all in 2010 dollars.) The latter number is in contrast with the high total realized in 2007, before the global financial crisis, of $2.17 billion. (Sasson, Theodore (2014). The New American Zionism, New York University Press.)

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