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ISRAEL SETS FAVOURABLE FISCAL POLICY ENCOURAGING GAS EXPLORATION

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Thursday, March 24th, 2011

A Committee to Examine the Fiscal Policy on Oil and Gas Resources in Israel recently recommended a new fiscal structure that ensures the cash flow of projects during the debt repayment period and reduces the state’s share in profits on par with other countries.

The committee’s suggestions, which take into consideration feedback from the public, keep a royalty rate of 12.5% while implementing alternative fiscal tools to increase the state’s share. The initial rate of levy will be 20% and rise gradually to 50% according to the amount of excess profits, which is 10% lower than originally proposed (20% raised to 60%). Furthermore, the share of the net profit for the state and public will increase from one third to 52%-62% (which is slightly lower than the proposed increase to two-thirds).

The committees recommendations follow the discovery of large-scale natural gas deposits in recent years within the economic waters of Israel, and expectations of additional gas deposits in the sea that are even greater then those found to date.