JERUSALEM -- Movement was reported this week on an Israeli government decision to authorize a long-term agreement to purchase gas from Gaza‘s offshore wells at market price from the Palestinian Authority. The Israeli cabinet made the decision to go ahead with negotiations to buy Palestinian gas on April 29.
The exploitation of the offshore gas field is expected to generate much-needed revenue for the Palestinians. Some analysts argue, however, that the main advantages of the deal are not only financial - it is hoped that the mutual dependency that will be created by the deal will help create an atmosphere more conducive to peace.
One problem, however, is precisely the matter of exploitation. If the 15-year deal is expected to be worth $4 billion, then how is it that the revenues expected to accrue to the Palestinians will be reportedly only some $1 billion? Another sticky problem is the matter of negotiating such an important deal while one party is occupying the other, and while there is on-going violence.
The Gaza gas wells are located in the Mediterranean sea about 20 miles (32 kilometers) off the coastline off the Gaza Strip, one of the most densely populated parcels of land on earth, where years of Israeli occupation and punitive closures have left most of the population living in poverty and severe distress. Under international law, the unilateral Israeli "disengagement" from Gaza in mid-2005 did not end the Israeli occupation.
In an area where so much is disputed, there is rare agreement - officially, at least -
that the Palestinian Authority has control over the undersea gas fields, which The Times of London this week called "the Palestine Authority‘s only natural resource."
The fishing resources off the coast of Gaza are another potential asset for the Palestinians, but the Israeli Defense Forces have continued to restrict Palestinian fishing.
An Israeli challenge to Palestinian control of the Gaza maritime gas field was rebuffed by a ruling of the Israeli High Court in 2000, which determined that the Oslo agreements had settled the matter.
It is not entirely clear exactly when the Gaza undersea natural gas field was first discovered, but the 1994 "Gaza-Jericho first" Agreement between Israel and the Palestine Liberation Organization (PLO) demarcated a 20-mile maritime zone for Palestinian fishing and economic activities Gaza‘s Mediterranean coastline, and this was subsequently re-confirmed in the 1995 Israel-Palestinian Interim Arrangements Agreement.
A official map delineating this zone, which runs straight out to sea perpendicular to the coast, starting 1.5 miles south of the Israel-Gaza border and 1 mile north of the Egyptian-Gaza border, is signed by the late Palestinian leader Yasser Arafat and the late Israeli Prime Minister Yitzhak Rabin, and attached to both Agreements.
The BG Group acquired the exploitation license for the gas field in an agreement with the Palestinian Authority in 1999, and the late Yasser Arafat signed off on the contract during a visit to London in the same year.
In the second half of 2000 - following the failure of the Camp David peace talks sponsored by US President Bill Clinton between Israeli Prime Minister Ehud Barak and
Palestinian President Arafat - BG Group dug two offshore wells, Gaza Marine-1 and Marine-2 wells, which both tested successfully - and which fall smack within this demarcated Palestinian maritime economic zone.
The Gaza gas production could supply some 10 percent of Israel‘s energy needs.
It is not clear what proportion of Palestinian energy - which is currently supplied by Israel - could be met by the Gaza gas.
Previous talks with Israel over a possible deal were abruptly cut off when agreement could not be reached, around the time of Israel‘s disengagement. Talks were then opened with Egypt instead. BG‘s spokesperson Fahey said Friday that "We did look quite hard at delivering gas to Egypt - and it‘s still an option." But, she said, it is less economic for the company than a direct sale to Israel.
BG built, in 2005, two storage trains for liquefied natural gas in Egypt to take gas from "designated suppliers," and was considering building a third to take the Gaza production, Fahey explained, but the Gaza Marine field is estimated to hold 1 trillion cubic feet of gas, which would fill just one-third to one-half of a storage train.
Buying the Palestinian gas would also be a better deal for Israel, because purchasing gas from Egypt would cost twice as much, the Jerusalem Post reported Thursday. Until very recently, Israel was trying to get an even better price, but BG insisted that the Palestinian gas would be sold at the market price.
The Times of London is reporting that outgoing British Prime Minister Tony Blair intervened personally with BG to give a second chance to negotiations on a deal with Israel.
Exactly what the Palestinians will get out of this remains to be seen.
Interfactional Palestinian fighting which has dominated the headlines from Gaza in recent months, is also a factor in the gas negotiations. British journalist Alan Johnston, who reported for the BBC World Service, was kidnapped in Gaza in March and is still being held, as in an Israeli soldier who was grabbed by Palestinians nearly a year ago near the Kerem Shalom area where the borders of Israel, Gaza and Egypt meet - and not far from the unusable runways of Gaza‘s international airport which were badly damaged for a second time by Israeli bombardment in 2002.
It is inconceivable that a final deal on the gas sale will be reached until these captives are released. The price for their release, according to reported claims by some Palestinian groups, will have to be the release of a significant number of nearly 10,000 Palestinians currently being held in Israeli detention.
"We‘ve been in discussions with Israel for over six months," BG Group spokesperson Petrina Fahey said from London in a telephone interview on Friday. "But we‘re not going to speculate on when we might conclude a deal, or describe every single meeting we‘re having," she said.
BG Group‘s vice-president in the region, Nigel Shaw spends half of his time in Israel and Palestine, and half of his time in London, Fahey said, and was on the plane back to London from Israel Friday. Press reports predict more talks with Israeli officials next week.
There are two strands to the talks that BG has been conducting, she indicated. "We need to complete commercial arrangements with the government of Israel." Why are these negotiations only with the government of Israel? Because the government of Israel will be the buyer, Fahey answered. Commercial arrangements include the terms and conditions of sale, and issues like price and royalties.
The second strand depends on a discussion between the Israeli and Palestinian authorities to make the necessary bilateral arrangements to seal the deal - but the Israeli government refuses to deal with any part of the Palestinian National Unity government other than President Mahmoud Abbas.
The Israeli cabinet has recently decided that representatives of the foreign and defense ministries will be involved in the talks, in addition to representatives of the finance and infrastructure ministries. The Israeli newspaper Ha‘aretz reported Thursday that the Israeli negotiating team will be headed by finance ministry director-general Yarom Ariav, and that "national infrastructures minister Benjamin Ben-Eliezer said this week he expected the state to close the deal within three months."
The Palestinian side is being represented by a member of Abbas‘ office. So far, the BG Group has been acting as the intermediary.
The secretive negotiations may only heighten Palestinian skepticism about the motives and interests of their leaders.
All sides have misgivings. The Times of London, which Wednesday broke the news about the possible pending breakthrough on what it called a "historic" deal, reported Thursday that Hamas official Ziad Thatha, the present economics minister in the Palestinian Authority National Unity government, likened it to an "act of theft."
According to The Times story Thursday, Mohammad Mustafa, economic adviser to Abbas, expressed hope that obstacles will be overcome and a deal concluded. In the same story, The Times also reported that the Israeli foreign ministry wants to conclude a deal as soon as possible.
The BG Group Web site reports that it now "holds 90 percent equity in the license, which would be reduced to 60 percent if Consolidated Contractors Company (CCC) and the Palestine Investment Fund exercise their options at development sanction."
The World Bank has reported that the Palestine Investment Fund (PIF) made substantial contributions to the devastated Palestinian economy in recent years - the PIF accounted for more than 10 percent of the Palestinian Authority‘s budgetary support in 2006 - thus depleting the Fund‘s assets.
The CCC, whose managing office is now in Athens, also has offices in 25 other countries and over 69,000 employees, with 2004 revenues of over $2.1 billion. Its Web site says it was one of the first Arab construction companies and it is now one of the largest - and was incorporated under Lebanese law in 1952. Its founders were Hasib Sabbagh, originally from Haifa, who left Palestine in April 1948 and went to Lebanon, and who remains the company‘s chairman; Said Khoury, originally from Safed - also the hometown of Abbas - who is the company‘s president; and the late Kamel Abdel-Rahman. Its US subsidiary is the Morganti Group, which reportedly owned shares - insured by the US government Overseas Private Investment Corporation - in the Gaza electricity plant bombed by Israel in anger June 2006 following the kidnapping of the very soldier whose return will be necessary to secure the conclusion of BG‘s Israeli-Palestinian gas deal.