Aharon (Orni) Izakson
Norway's experience in managing its oil and gas revenues and building its energy industry should guide Israeli policy makers.
It was reported recently that in an offering of shares and warrants by Israel Discount Bank (TASE: DSCT), Norges Bank, the central bank of Norway, bought shares to the tune of NIS 200 million, and holds 2.6% of the Israeli bank. Norges Bank manages the largest sovereign wealth fund in the world, the Government Pension Fund Global, worth some $890 billion, deriving from oil and gas profits. The fund's capital is being kept for a rainy day, such as when Norway's oil and gas reserves are depleted. The Norwegian government is allowed to include in its annual budget up to 4% of the value of the fund's holdings.
The purchase of shares in Discount Bank is not the first or the largest investment by the Norwegian pension fund in Israel. Such investments totaled $2.4 billion at the end of 2015. The fund's five largest investment in Israeli stocks came in late 2015: Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) ($928 million); Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ) ($78 million); Bank Hapoalim (TASE: POLI) ($56 million); Bank Leumi (TASE:LUMI) ($51 million); and NICE Systems Ltd. (Nasdaq: NICE; TASE:NICE) ($46 million). The Norwegian fund is the largest foreign investor in Israel, and this fact is a sign of high regard for the Israeli economy and a demonstration of the desire of the government in Oslo to maintain close business ties with us.
Since in Israel, unlike in Norway, all the country's natural gas is produced by the private sector, the State of Israel cannot transfer to a sovereign wealth fund, if one is set up, all the profits from gas sales. Nevertheless, as is well known, the Ministry of Finance will receive tax and royalty payments from the production companies. The ministry would do well to act with restraint and not transfer a substantial portion of the royalties to the current budget, not even for education and infrastructure development.
On the most optimistic estimate, the amount that will accumulate in the Israeli fund will be in the tens of billions of dollars, over a long period. The best use of this money is to save it entirely for future generations, or for an emergency.
Another lesson that Israel can learn from Norway concerns setting up industries that are ancillary to the energy sector. In the past forty years, hundreds of companies have arisen in Norway engaged in manufacturing, engineering planning and consultancy, logistical services, and other fields that serve the exploration and production companies active in the huge sea area west and north of the country's coastline.
Norwegian companies that have grown up as a result of the maritime oil and gas discoveries are now among the leading companies in the world in their fields, particularly production and construction of oil and gas rigs, equipment and systems. Their annual sales amount to $85 billion, of which $30 billion derives from exports, and they employ about 140,000 people in Norway.
Despite the decline in investment in maritime energy infrastructure, because of the fall in the oil price, new investment is expected in the next three years, including in Israel. Norway alone plans to invest no less than $140 billion in production infrastructure. Brazil, which will invest $120 billion, and the US, which will invest $90 billion, follow in its wake. Like Norway, Israel must assist local companies in adapting themselves to the needs of maritime oil and gas production, and encourage the founding of additional enterprises.
Since Israel presents no threat to Norway's leading status in energy, and does not lie close to Norway's main markets, it is only natural that we should avail ourselves of the vast know-how that has accumulated there in order to set up and enhance companies that will offer a solution to the growing demand for gas in the Eastern Mediterranean and perhaps in other places, in Africa for example.
During the recent visit by the Norwegian energy minister to Israel, the possibility of technological cooperation between the two countries was discussed, while at meetings held in Norway between Israeli and Norwegian companies the Israeli participants learned a great deal from their hosts' experience. Such activity, especially government planning for long-term investment of the state's revenues and substantial expansion of the local energy industry, is vital and urgent, and it would be best if it were undertaken before production starts from the Leviathan gas reservoir.
The writer is chairman of the Norwegian-Israeli Chamber of Commerce.
Published by Globes [online], Israel business news - www.globes-online.com - on October 27, 2016 - © Copyright of Globes Publisher Itonut (1983) Ltd. 2016
SOURCE
Norwegian companies that have grown up as a result of the maritime oil and gas discoveries are now among the leading companies in the world in their fields, particularly production and construction of oil and gas rigs, equipment and systems. Their annual sales amount to $85 billion, of which $30 billion derives from exports, and they employ about 140,000 people in Norway.
Despite the decline in investment in maritime energy infrastructure, because of the fall in the oil price, new investment is expected in the next three years, including in Israel. Norway alone plans to invest no less than $140 billion in production infrastructure. Brazil, which will invest $120 billion, and the US, which will invest $90 billion, follow in its wake. Like Norway, Israel must assist local companies in adapting themselves to the needs of maritime oil and gas production, and encourage the founding of additional enterprises.
Since Israel presents no threat to Norway's leading status in energy, and does not lie close to Norway's main markets, it is only natural that we should avail ourselves of the vast know-how that has accumulated there in order to set up and enhance companies that will offer a solution to the growing demand for gas in the Eastern Mediterranean and perhaps in other places, in Africa for example.
During the recent visit by the Norwegian energy minister to Israel, the possibility of technological cooperation between the two countries was discussed, while at meetings held in Norway between Israeli and Norwegian companies the Israeli participants learned a great deal from their hosts' experience. Such activity, especially government planning for long-term investment of the state's revenues and substantial expansion of the local energy industry, is vital and urgent, and it would be best if it were undertaken before production starts from the Leviathan gas reservoir.
The writer is chairman of the Norwegian-Israeli Chamber of Commerce.
Published by Globes [online], Israel business news - www.globes-online.com - on October 27, 2016 - © Copyright of Globes Publisher Itonut (1983) Ltd. 2016
SOURCE
