Sources inform ''Globes'' that Israel wants to renew talks with BG Group plc (NYSE: BRG: LSE: BG) to buy natural gas from its reserves offshore from Gaza. The Palestinian Authority is a partner in the concession. The move follows proposals by the Egyptian government to raise the price of its natural gas.
The government has informed BG that it was prepared to renew negotiations on natural gas purchases. Energy market sources say that the Ministries of Finance and National Infrastructures want to renew the negotiations because Egypt wants to reopen the gas delivery contracts signed with Israel. Both Ministry of Finance director general Yarom Ariav and Ministry of National Infrastructures director general Hezi Kugler agreed to inform BG of Israel's wish to renew the talks.
The sources added that BG has not yet officially responded to Israel's request, but that company executives would probably come to Israel in a few weeks to hold talks with government officials.
In January 2008, BG announced that it was terminating negotiations with the Israeli government and closed its offices in Israel. The announcement followed disagreements with the Ministry of Finance over the price of natural gas and the deadlock in negotiations on arrangements for transferring payment from Israel to the Palestinian Authority.
BG was asking $4.60-5 per million British Thermal Units (BTU), which was more than the $4 price per million BTU of East Mediterranean Gas Co. (EMG) However, the Egyptian government has since officially announced that it intends to raise the price of natural gas sold to Israel following criticism of the contract by the opposition.
BG owns 90% of the Marin natural gas concession offshore from Gaza, with the Palestinian Authority and Consolidated Contractors Company (CCC), owned by Lebanon’s Houri family, owning the rest. The Palestinian Authority has an option to increase its holding in the concession to 40%.
An Israeli contract with BG could total $3-4 billion. Energy market sources believe that if negotiations resume, BG will ask even higher prices than before, at $7-8 per million BTU, because of the rise in global energy prices.
Government sources said that, in addition to commercial disagreements, there was now a greater chance of progress in the negotiations, politically speaking, following the cease-fire agreement with Hamas in Gaza and the progress in the peace talks with the Palestinian Authority.
Published by Globes [online], Israel business news - www.globes-online.com - on June 23, 2008
© Copyright of Globes Publisher Itonut (1983) Ltd. 2008