1.1 billion shekels from natural gas and minerals royalties

תאריך: 3/1/2021

​ Subsequent to connection of the Leviathan reservoir and exports to Egypt and Jordan, the Ministry of Energy in 2020 has collected in excess of 1.1 billion shekels from natural gas and minerals royalties.

The Royalties, Accounting and Economics Division of the Natural Resources Administration at the Ministry of Energy, has released today its revenues report from which it arises that in 2020, revenues in excess of one billion shekels were reported for the first time – a sum of 1.105 billion shekels, from fees and natural gas and quarried mineral royalties. This represents an increase of 241 million shekels compared with revenues collected in 2019.

Energy Minister, Dr. Yuval Steinitz: "As I made clear in advance, the big revenues from natural gas come only a few years after development. This year, for the first time, the royalties exceeded one billion shekels, and when we also take into consideration corporate tax and Sheshinski tax revenue, we reach much larger revenues. This year we expect an overall amount of approximately three billion shekels from all the natural gas taxation items, and within a few years, the amount is expected to pass ten billion each year, and subsequently even more. However, in my view, the main profit from the natural gas was and remains the dramatic reduction in air pollution as a result of the transition from polluting coal and oil in the power stations across Israel – a move that has already led to a reduction of about 70% in the pollution of the air we all breathe."

The main portion of the revenues in 2020 comes from the natural gas royalties, which totaled approx. 1.09 billion shekels, which reflect an increase of approx. 29.6% compared with  2019. The Ministry of Energy explains that the increase is due to a 48.4% increase in the total production of natural gas from the large reservoirs in Israel, as a result of the start of production from the Leviathan reservoir on December 31, 2019., The connection of the Leviathan reservoir also led to a significant rise in the export of natural gas, in light of the commencement of natural gas exports to Egypt and a major increase in exports to Jordan, both through the national transmission system built by INGL.

Most revenues from the natural gas royalties, amounting to approx. 592 million shekels, are sourced from the natural gas from the Tamar reservoir, an amount reflecting production of approx. 8.27 BCM of natural gas. This is a decline in revenue at a rate of approx. 29.2% compared with 2019 and is ascribed to a significant decline in natural gas prices. This decline is expected to continue in light of the significant competition that has developed in the natural gas sector. In terms of natural gas prices, as of the month of December 2020 vs. December 2019, it is evident that the decline in the price of natural gas is most significant. The weighted average price of natural gas per heat unit produced from Tamar in December 2020 was $4.8, compared with $5.512 in December 2019 (a fall of approx. 13%). These declines have a major impact on electricity prices in Israel. The decline in the Tamar reservoir production quantities arises from a decline in the quantities being sold to the Israel Electric Corporation, which has transferred some of its purchases to the Leviathan reservoir.

This year, for the first time, the Ministry of Energy also received natural gas royalty revenues from the Leviathan reservoir in 2020, which totaled approx. 499 million shekels, an amount that reflects production of c. 7.32 BCM. Revenues from royalties arising from export amounted to 273 million shekels, which constitute c. 54.7% of the total amount of royalties from the Leviathan reservoir.

In addition to the natural gas royalties, in 2020 revenues were recorded from quarried mineral royalties in the amount of c. 8.7 million shekels and revenues of c. 4.9 shekels from fees.

The Ministry of Energy expects a further increase in royalty revenues in 2021 to a new record of approx. 1.15 billion.

In addition to the royalties collected by the Ministry of Energy in respect of natural gas and minerals, the State this year also collected corporate tax and for the first time also profit levy from natural resources ("Sheshinski Tax") for natural gas. The Sheshinski Tax revenues are expected to exceed one billion shekels already in 2021, according to Tax Authority estimates.