"The Israeli energy market will have to adjust to changing global prices. The price of natural gas doubled last year, and this cannot be ignored. Israel will have to pay much more for natural gas in the future, because the price keeps going up," BG Group plc (NYSE: BRG; LSE: BG) Gaza Marine policy and corporate affairs manager Michael Barron told "Globes". He made the comment to explain why the company called off negotiations with the Israeli government for the sale of gas reserves.
Last week, BG Group announced the closure of its office in Israel, after decided to call off the negotiations. The company added that it would continue to monitor developments in the Israeli market. Under the deal, 15% of BG Group's natural gas field offshore from Gaza was due to be marketed in Israel and to the power station in Gaza.
Barron said that Israel refused to promise the Palestinian Authority not to disrupt the gas supply to Gaza. "The Palestinian Authority wanted an Israeli commitment not to disrupt the gas supply to Gaza even before Hamas rose to power. The Israeli government would not agree, and then Hamas rose to power in Gaza, which complicated matters. The Palestinian Authority wanted an Israeli guarantee not to disrupt the gas supply. There was also no agreement on the issue of money transfers from Israel to the Palestinian Authority."
Barron said that BG Group was disappointed at the Israeli government's conduct, after asking Prime Minister Ehud Olmert in the summer of 2006 to resume negotiations for the sale of natural gas to Israel. "There was a window of opportunity to close deal, but it was missed. We're definitely disappointed about it," he said.
"There was a huge gap between ministers' statements and the way the negotiations were handled. No progress was made for 18 months, and in some cases the gap widened instead of narrowing. In December 2007, we concluded that there would be no deal, and we decided to take a time-out."
Barron added that BG Group avoided having any contact with Hamas, but that all the factors that hindered a deal existed before Hamas took power. "We had no contact with Hamas. It's against British law. The agreement on the purchase of the gas reserves in Gaza was supposed to be for 15 years, and backed by agreements between the Israeli government, the Palestinian Authority, and the UK," he said.
"Globes": Under what conditions will BG Group consider resuming negotiations with the Israeli government?
Barron: "A number of things must happen before we return to the negotiations. First of all, the Israeli government must change the natural gas law, as directed by the Supreme Court. We want to see progress in the structure of Israel's energy market (the entry of private companies - L.B.), and we would especially like to see progress in the agreements that are due to be signed between Israel and the Palestinian Authority concerning the deal. We've had it with talk; we want to see results."
Barron added that, although the negotiations have been suspended, BG Group was maintaining contact with the Ministries of Finance and National Infrastructures. "We haven’t severed links with the Ministry of Finance, but you should understand that even if things change, months or years could pass until we sell the gas."
Published by Globes [online], Israel business news - www.globes-online.com - on January 17, 2008
© Copyright of Globes Publisher Itonut (1983) Ltd. 2008