Israel to postpone the creation of a sovereign wealth fund to be fueled by tax revenues from natural gas production until next year, as this year’s inflow turned out to be below expectations, Israeli media report .
As daily media Globes Remarks, this is the second postponement of the sovereign wealth fund. Initially it was supposed to start operating in 2018, but its launch has been delayed for 2021. Now it is being delayed again as falling gas prices interfere with tax revenue plans.
According to the report, the government had set a target of $ 310 million (NIS 1 billion) for the fund, but tax revenue figures released this year for the first time by the Israeli tax authorities revealed that the amount raised is of $ 227.4 million (NIS 741 million). ).
Israel found natural gas in the Mediterranean a decade ago and has been increasingly active in the development of these reserves since then. The country has turned a net importer of gas to a relatively self-sufficient gas nation after the discovery of the giant fields of Tamar and Leviathan as well as eight smaller fields.
The country even started exporting natural gas a few years ago and this year it started discuss allow more gas to be sold abroad so as not to miss the increase in demand before it starts to contract due to the energy transition.
Yet the volatility of gas prices prevented it from taking full advantage of the potential benefits of these discoveries. Since this volatility is not about to end anytime soon, it is likely that the government will have to revise its revenue targets.
Indeed, according to Globes, the Israeli tax administration has already revised long-term cash inflows from taxes on natural gas production to $ 13.5 billion to $ 16.27 billion (NIS 44 to 53 billion) between this year and 2064.
Nonetheless, the authority expects revenues from natural gas production to hit the NIS 1 billion target next year, which should give the sovereign wealth fund the green light, even if the potential revenues to long term of the fund may be lower than initially forecast.
By Irina Slav for Oil Octobers
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