As per the Israeli Gas Law-2002: the piping of natural gas at low pressure through pipelines. The system distributes gas at low pressure (less than 16 Bar).

According to the law, the distribution license holder is forbidden from carrying out any other activity besides the construction and operation of the distribution network. Nevertheless, another company – such as a sister company – of the distribution network licensee may deal in additional activities such as the marketing of natural gas. The law does not grant any benefit in the marketing of the gas to consumers by the distribution company and thus from the very first day the network will operate under the open access system.

According to the Natural Gas Authority the objectives of the distribution network licensee is to construct a distribution network according to his proposal in the tender and to link up consumers and/or marketers cum shippers at low pressure that request to be linked up. The connection of each network to the transmission system is via PRMS stations that the transmission licensee orders on behalf of each distribution network. The distribution licensee sets up link up facilities including reading meters for each consumer and takes a link-up tariff again in accordance with his proposal in the tender and is responsible for reading the meter.

It is incumbent upon the distribution licensee to provide information to the transmission licensee regarding the gas consumptions of his regional consumers. The information is to be sorted by marketer/shipper (taking into consideration that a consumer can be his own shipper) in order to facilitate the collection of the transmission tariff. Since the distribution licensee is responsible on the one hand for reading the meters and on the other hand he has the data regarding each consumer’s marketer/shipper, the transfer of consumption data sorted out by shippers will structure the relationships in the market place and facilitate matters for all players.

There is no business relationship between the distribution license holder and the natural gas supplier. The distribution network licensee can only know what is happening in his region whilst the marketer/shipper can operate in all the regions. It is the marketer/shipper and not the distribution licensee that is responsible to supply the gas to consumers.

Israel’s gas distribution system is divided into 6 regions. Each of the six regions is to be licensed to a regional licensee.

Negev region – Negev Natural Gas Company won the first tender in the Negev region, in Beer Sheva and Dead Sea area in February 2009 for a total investment of 80-100 million. The company is owned by Amisragas and Electra and Aharon Hamo. Company got a license for 25years and the main sector of this is due to be on line by 2016. The Magal company however will also continue to provide gas in the Arad region from the Zohar gas field.

Central Region – The Super Energy consortium which consists of 50% of Shapir Civil and Maritime Engineering Ltd. and 50% of Supergas, one of the Israeli LPG companies won in March 2009 the second natural gas distribution tender. The tender is to set up a distribution network in the center of Israel and is due to link up to the transmission system at the Reading Power Station and Nesher in the region of Ramle in order to supply consumers in the region of Ramle, Lod, Zrifin, the southern Dan Region and others. The project will cost a total of 250 million shekels to be invested over 8 years and the license is for 25 years and the main section of this is due to be on line by 2017

Southern region – South Natural Gas Company Ltd. (Drom Gaz Tivi) owned by Amisragas, Elco and Hamo-Aharon won the tender in November 2010 to construct the distribution network Ashkelon and Ashdod, Kiryat Gat, Kiryat Malachi (connecting at Zafit) and Shderot (connecting at the Lapidot Station). The license is for 25years at an estimated cost of 106 million. This tender is now being contested in court (2012)

Northern region – Two tenders are due to be published soon for the northern area which will be divided into two regions. The winner of the tender in the north will link up at the Hadera power station and the Hagit power station.

Jerusalem Area – INGL is promoting a transmission line in the Jerusalem area which will enable to publish a tender for a distribution network in the Jerusalem and surrounding areas in the future
The distribution licensee charges two different tariffs: a one-time connection tariff and a distribution tariff for the actual throughput of gas that the consumer is transmitting through the distribution network. The consumer will pay these two tariffs according to the category/size of consumer that he belongs to.

The tariff that a distribution licensee can ask for (not under clause 102 of the law) is based solely on an actual flow tariff (except for the connection tariff) based on the price submitted by the tender winner. Contrary to the transmission system, there is no throughput capacity charge, but payment is only for the actual amount of mmbtu’s distributed through the system.

For the construction of a distribution network and its operation, the distribution licensee can charge consumers/shippers a distribution tariff in accordance with the proposal put forward and accepted in his tender. The tariffs are solely for infrastructure services and do not include the price of the gas itself, which is paid by the consumer to the natural gas supplier according to a contract entered into between a willing buyer and a willing seller.

There are 4 different types of categories of distribution consumers: large consumers who consume over 1 million cubic meters per year; mid range consumers who consume between 100 thousand to 1 million per year; small consumers who consume between 10 thousand and a 100 thousand per year and very small who consume who consume up to 10 thousand a year (see table attached).

A consumer will be categorized at the outset of the first year based on his forecast of consumption and at the end of the year based on his actual past consumption.

In principle, all distribution pipelines will be composed of High Density Polyethylene pipe (HDPE). The pipeline connection points to the PRMS facilities will be of carbon steel that can withstand internal pressure of 80 bar and any place where the distribution network will have to cope with 16 bar pressure, there the pipes will all be composed of such identical carbon steel.

Low pressure distribution system – will be those sections of the distribution network that will operate at maximum pressure of 75 to 150 millibar (1 bar = 1,000 millibar). In those sections it is expected to supply natural gas to certain consumers or areas where it is not feasible to lay PE mains (Polyethylene pipes) at a pressure of 4 to 7 bar. These sections will thus receive natural gas from the low pressure network via the regional PRMS facilities (DPRS).

Every consumer of natural gas in Israel linked to a distribution network has to pay 5 different tariffs: distribution tariff, link up to the distribution network, actual flow tariff for the transmission system, capacity tariff for the transmission system (special simplified tariff for distribution consumers of the transmission system) and the natural gas price itself.

9th Dec 2012 – 4th & 5th
licenses of the 6 gas distribution regions have been approved by the NGA.

The company that won the tender for setting up and operating the gas distribution network in Hadera & the Valleys is SuperNG, the sister company of the gas distribution licensee in the central region which is owned by Supergas and Shapir Engineering. The company has pledged to invest some 218 million NIS in the distribution network within five years, of which 128 million NIS will be invested within three years. The Hadera & the Valleys area includes, among others, Netanya, Hadera, Zikhron Ya’akov, Migdal HaEmek, Afula, Nazareth, Tziporit industrial zone, Tirat HaCarmel and Emek HaMayanot.

The Haifa & Galilee area was won by Rimon Natural Gas, owned by Rimon Ltd. and the Mer Group, which has pledged to invest some 225 million NIS in the distribution network within seven years, of which over than 148 million NIS will be invested within three years.
The area includes, among others, Haifa, Haifa Bay and the Krayot, Nahariya, Ma’alot-Tarshiha, Akko, Karmiel, Kiryat Shmona, Tiberius, Rosh Pina, Safed, Katzrin and Zemach.

March 2014:

A distant consumer is defined as a medium consumer who consumes 100,000-1,000,000 m³ of gas per year and is located at least 3,000 m from the network, or a large consumer who consumes more than 1,000,000 m³ of gas per year and is located at least 6,000 m from the network. In both cases, the consumer’s annual turnover must not exceed 400 million shekels.
Consumers who consume 100,000-500,000 m³ of gas per year are eligible for a grant of up to 750,000 shekels; Consumers who consume 500,000-1,000,000 m³ per year are eligible for up to 500,000 shekels; and consumers who consume more than1,000,000 m³ per year are eligible for a up to 250,000 shekels. Grants will be subject to the board’s approval and budget limits.
In addition, distant consumers will be eligible for further aid for the additional connection tariff payment, amounting to 1 million shekels per 10 km.

Of the 120 million shekel budget, 116 million are still available. 10.3 million shekels have been allocated to the Negev, 13.3 million to the south, 22.7 million to the center, 11 million to Jerusalem, 21 million to Hadera & the valleys, 22.2 million to Haifa, the Galilee and the Golan, 14.5 million to distant consumers, and 1 million has been kept as a reserve.