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Israel will postpone the establishment of a sovereign wealth fund meant to be filled with tax revenues from natural gas production until next year as this year’s intake turned out lower than expected, Israeli media report.
As daily news outlet Globes notes, this is the second postponement of the sovereign wealth fund. Initially, it was supposed to begin operating in 2018 but its launch was delayed for 2021. Now, it’s being delayed again as lower gas prices interfere with tax revenue plans.
According to the report, the government had set a target of $310 million (1 billion shekels) for the fund but tax revenue figures released this year for the first time by the Israeli tax authorities have revealed the amount collected is $227.4 million (741 million shekels).
Israel struck natural gas in the Mediterranean about ten years ago and has since then been increasingly active in developing these reserves. The country has turned from a net importer of gas into a relatively self-sufficient gas nation after the discovery of the giant Tamar and Leviathan fields along with eight smaller fields.
The country even started exporting natural gas a few years ago and this year it started discussing allowing more gas to be sold abroad to avoid missing out on the increase in demand before it begins shrinking because of the energy transition.
Yet the volatility in gas prices has prevented it from reaping the full potential benefits of these discoveries. Since this volatility is not about to end anytime soon, chances are the government may need to revise its revenue targets.
Indeed, according to Globes, the Israel Tax Authority has already revised the long-term fund inflows from natural gas production taxes to $13.5-$16.27 billion (44-53 billion shekels) between this year and 2064.
Still, the authority expects revenue from natural gas production to hit the 1-billion-shekel target next year, which should greenlight the sovereign wealth fund even though long-term prospective income for the fund could be lower than initially projected.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.