Energy website of Yigal Laviv (Yaacov Zalel ) – Interview of Gina Cohen: With Chevron’s entry, price controls should be off the table
Israel’s regulators will have to learn how work with an energy giant like Chevron and raise the bar so that cooperation is fruitful, says Gina Cohen, an expert on energy and gas who serves as an adviser to energy companies, in an interview with EnergiaNews.
Q-Are the government and Ministry of Energy ready to deal with a giant company like Chevron?
“What do you mean by deal with? The regulators can say ‘we have our own principles, they’ll do what they want.’ It’s not that it’s going to be harder for us to deal with them. But there is more to lose if the regulators don’t do this in the manner that is accepted in the world. The regulators will have to take into consideration that we were able to draw a giant company to Israel. In the past we lost two companies (Woodside and BP) and it’s not like the regulators can say to themselves we have ten companies and they’ll all stay. We had two non-majors, rather half-majors, and we lost both so they will have to think twice before doing anything. They have to maintain environmental regulation without making any compromises. But other regulations, such as price controls, aren’t suitable anywhere. And that’s where, in my opinion, they have to be careful not to do it.”
Q-It’s accepted in the world for these type of companies to have a huge advantage over the small countries they work with – and in fact they ‘butcher’ them.
“That’s how it used to be. When the Seven Sisters operated in places like Nigeria or Belize, which didn’t have internet and didn’t know what was going on, they had a lot more power. And indeed, throughout history, the giants were able to pay very little taxes and do what they want. But those times are long gone and it’s one of the reasons behind the founding of OPEC. OPEC was established because they said ‘we want more control over our resources. We know how to do things on our own. We know how to protect ourselves. So the pendulum shifted from the side of big companies doing whatever they want to the side of OPEC and other countries that thought they could go at it alone and who now understand that it’s all about cooperation, and so an equilibrium has been reached. There are western companies operating even in places like Russia, Iraq and Iran. They understand that it’s cooperation between countries and companies and each side brings their own capabilities, experience and knowhow and have to work together. The regulator in this case has to realize that this cooperation is to everyone’s benefit and that we need a dialog. With a company like Chevron that will rise to a higher level because it operates in 180 countries, it has experience.”
“The regulators should get help and learn about what is happening in the world instead of doing things the way they did with the gas outline, which includes price controls. It says that you can’t export at a cheaper price than in Israel and that is price control nonsense. It’s not something that is generally accepted in the world.”
Q-If Chevron is dominant, will it be able to raise prices at any rate it wants?
“No. A company like Chevron doesn’t look at a single country. It has a worldwide name and reputation. Whenever it does something that isn’t accepted in the O&G industry, the whole world knows about it. It wouldn’t risk its reputation. Its annual revenues amount to $170 billion. If it raises price here, it would be equivalent to a figure with four zeros after the decimal point. They’ll want a fair price to maintain their reputation. Maybe a cheaper price in order to export at a cheaper price. It might say that. I think we need less regulation over prices and of course strict environmental regulation.”
Q-In principle, will it be harder or easier for the regulators to cope with Chevron?
“I don’t know. It will raise the dialog to a higher level. It’s a different kind of engagement, on a more international level as Chevron operates in 180 countries. How this difference will be reflected, we still don’t know.”
Q-Would the gas outline have been accepted without the pressure from social organizations?
“I don’t think the outline should have happened. Those who found the gas were supposed to develop their reservoirs, the outline caused a delay of 2.5 years. It’s true that it brought competition but I would have preferred less stringent regulation and more efforts at attracting companies like BP, Woodside and now Chevron… let them drill, find gas and create competition out of that. The outline got us out of a situation we shouldn’t have been in. The activists and leftist media led us to a place that we should not have gotten into. So after two years of negotiations while everything is stuck, the outline got us out. We shouldn’t have been there in the first place. I’m talking about activists, regulation, press outlets that are a bit too extreme. Regulation should apply to the [question] of who receives a license, where do you drill, infrastructure, taxes, environmental quality. Things related to the market and price competition don’t need regulation.”