Gaza has gas and gas pains

A few years ago, British Gas, on licence from the PA discovered $4 billion worth of gas just off the Gaza coast. But efforts are stalled at recovering it.

Jpost provides an extensive background to this question in Still waters.

[..] FOLLOWING THE discovery of the gas, the Palestinian Investment Fund, under the auspices of the office of current PA Chairman Mahmoud Abbas, reached an agreement with BG and CCC, securing for itself at least 10 percent of the revenue from the sale of the gas, plus a tax and royalty settlement worth an additional 12.5% and also a guarantee that the 25% automatic corporation tax would be sent directly to its bank account.

The problem for BG, however, was that it could not start drilling and constructing a pipeline until it secured a customer, something it is still trying to do.

The problem for BG was that it needed Israel as a customer to make the venture worthwhile.

Sharon didn’t want the gas to be produced as he feared it would fund Arafat’s terrorists.

Concurrent with Sharon’s rise to power, the government, which had long sought to expand the country’s natural gas resources to fuel its power stations, awarded a tender to Yossi Maimon’s East Mediterranean Gas Company to provide approximately 7 billion cubic meters of gas a year for 20 years, beginning in 2009. Under terms of the agreement, 5.8 billion cu.m. would go to the Israel Electric Company and the remainder to private companies. Until EMG’s gas begins flowing, Yam Thetis, a US-Israel gas company controlled by Yitzhak Tshuva, will remain the sole importer of natural gas.

BG then attempted to export their gas to Egypt but that also proved problematic.

“The energy market in Israel wasn’t going to be right for us, it seemed,” said a BG official. “Even if we could have convinced the prime minister that no money would end up in the hands of terrorists, it became clear that the liberalizations that were supposed to be introduced into Israel’s energy market were just not happening.”

But with the removal of Sharon, things changed

Plans for construction of the necessary infrastructure and the pipeline from Gaza Marine to Egypt were well under way when Israel suddenly reentered the picture following Sharon’s stroke last winter as Ehud Olmert, before he was even elected prime minister following Sharon’s illness, reopened talks with BG in February 2006.

According to Hezi Kugler, director-general of the National Infrastructures Ministry, even with the added gas from Yam Thetis and EMG, the country’s power demands are expected to exceed supply in the near future. “The additional gas will be enough for only a few years; we need to increase it substantially to meet our power needs,” he said.

To meet those needs, Israel once again turned to BG, confident that the gas reserves in the Gaza Marine field, coupled with EMG and Yam Thetis, would be more than enough for at least the next 15 years.

Yet the process of moving the gas from the sea to the shore has proven to be as difficult as ever. Negotiations with BG over the price of the gas have continued haltingly over the last year and a half and, despite the government’s clear intentions to make the deal a reality – even going as far as canvassing local companies to determine how much natural gas they would be interested in purchasing from Gaza Marine – last May BG threatened to pull out of the deal permanently. The failure to successfully negotiate a price signaled that the deal would never become a reality, it said, and once again began planning for the Egyptian option.


August 20, 2007 | Comments Off on Gaza has gas and gas pains

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