Israel in secret talks with BG on Palestinian gas

The talks concern development of the Gaza Marine license for the Palestinian population in the West Bank and Gaza.

Sources inform ''Globes'' that Israel is in secret talks with BG Group plc (NYSE; LSE: BG) (British Gas), which owns the rights to the Palestinian Gaza Marine license, offshore from Gaza. The talks concern development of the reservoir for the Palestinian population in the West Bank and Gaza. The talks, which have been going on for several months, are unrelated to next week's visit by US President Barack Obama, but the subject will probably come up during his talks with Israeli leaders.

Adv. Yitzhak Molcho is representing Israel in the talks. Quartet Middle East Envoy and former UK Prime Minister Tony Blair is also involved.

So far as is known, there are no direct talks with Palestinian representatives, because of political sensitivities and the complex relationship between the Palestinian Authority and Hamas.

BG, which discovered the Gaza Marine reservoir in 2000, owns 60% of the rights. Its partners are Contractors Company (CCC), owned by Lebanon’s Houri family, which owns 30%, and the Palestinian Investment Fund (PIF), which owns 10%. Since the discovery, BG has unsuccessfully tried several times to sell gas to Israel Electric Corporation (IEC) (TASE: ELEC.B22). The Gaza Marine reservoir, located 35 kilometers west of Gaza, has an estimated 30 billion cubic feet (BCM) of gas, enough for the Palestinians' needs for several years.

The Gaza Marine reservoir will cost an estimated $2.5 billion to develop over three years.

The Palestinians have one power station, a 240-megawatt plant in Gaza built by Enron. The plant is powered by diesel, because Gaza is not hooked up to any natural gas pipelines. The Palestinian Authority wants to build four natural gas power stations in the West Bank, the first of which is planned to be built near Jenin.

In early 2011, Prime Minister Benjamin Netanyahu proposed to Palestinian Authority President Mahmoud Abbas (Abu-Mazen) to discuss developing the Gaza Marine reservoir. The proposal was made in view of Israel's natural gas shortage following the cessation of gas deliveries from Egypt. Israel wanted to cooperate with the Palestinian Authority to develop Israel's Noa South reservoir, which spreads into Gaza's maritime area. In the end, Israel decided to develop the Noa reservoir without any official agreement.

Published by Globes [online], Israel business news - www.globes-online.com - on March 13, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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