Israel wages war on the Gaza Strip from time to time. But there is another open-ended war that is not receiving its due attention by the Arabs, concerning Israel's prevention of the Palestinian Authority from developing the ‘Gaza Marine' field, which is estimated to hold a trillion cubic feet in natural gas reserves. The field was discovered in 2000 by a consortium led by the UK-based company British Gas (BG), together with the Palestinian Investment Fund (PIF), and the Athens-based Consolidated Contractors Company (CCC), one of the largest Arab-owned contracting companies. In November 1999, the Palestinian Authority had granted BG a 25-year concession agreement to drill for petroleum in the Palestinian territorial waters off the coast of Gaza. Following the discovery of the field, BG presented the Palestinian Authority in 2002 with a plan to develop it, proposing to begin production from the field within four years. Negotiations began immediately after the discovery of the field, between the Palestinian Authority and BG on the one hand, and the Israeli government on the other hand, pursuant to the section on economic cooperation in the Oslo Agreements. The negotiations were launched at the time based on the following premises: Israel's need for natural gas, especially after it decided to reduce the amount of petroleum products used to generate electricity; the fact that the Palestinian Authority now possessed reserves of natural gas; and BG's need to market the gas. Of course, attention was focused initially on providing the Gaza power station with gas, but the quantities expected to be consumed were relatively small and did not provide alone the economic incentive sufficient for the success of the project. Furthermore, BG proposed in June 2000 to the state-owned Israel Electric Corporation (which at the time monopolized the production and distribution of electricity in Israel), to supply it with gas from its fields in Egypt, Palestine and Israel. But BG was not the only company with gas supplies in the region. Indeed, an Egyptian - Israeli consortium , the East Mediterranean Gas Company (EMG) (comprising the Israeli group Merhav and Egyptian businessman Hussein Salem) offered to sell Egyptian gas to Israel, which is what happened eventually, before being stopped after the revolution. Currently, the gas sale agreement is being reviewed by Egyptian courts on suspicions of corruption, in light of the low gas prices offered by Egypt to Israel at the time, and suspicions concerning kickbacks. The Israeli government initially refused BG's offer to buy gas from Gaza for two main reasons: The objection voiced by then-Prime Minister Ariel Sharon, who cited security reasons (he refused for Israel to rely on supplies from one Arab country). But Sharon changed his mind in 2002. And second, the preference given to Egyptian gas because the price offered was lower. At the time, British Prime Minister Tony Blair acted as a mediator in the negotiations, in an attempt to secure a market for Gaza's gas within Israel. Blair succeeded in persuading Sharon to withdraw his veto on the deal. However, Sharon set tough conditions including agreeing to provide Israel with 0.05 trillion cubic feet of Palestinian gas annually for a period of 10 to 15 years. Then in 2003, the real intentions of Sharon were made clear, when he set another condition which stipulated that the revenues must not be transferred to the Palestinian Authority, under the pretext of preventing the financing of 'terrorism'. Israel suggested instead that the revenues be deposited in the 'Special Account', used to receive foreign aid and tax revenues collected by Israel on behalf of the Palestinian Authority. After months of negotiations, Israel signed an agreement with EMG, whereby Israel would receive gas supplies from Egypt for 15 years. Then Ehud Olmert became Israel's prime minister while Mahmoud Abbas became the head of the Palestinian Authority, with Tony Blair continuing his efforts to mediate. On April 29, 2007, the Israeli government agreed to negotiate with BG, but under the following conditions: Israel would buy 0.05 trillion cubic feet of Palestinian gas annually at $ 4 billion, starting in 2009. Israel would then transfer the revenues to the ‘Special Account' without any right for Hamas to withdraw from the deposited amount. Israel also demanded that the pipeline run from the 'Gaza Marine' field to the city of Ashkelon in the Israeli territory, to be distributed from there to the rest of Israel, while gas would be delivered from Ashkelon to the Gaza Strip. This meant that Israel would control the supply of gas to Gaza. However, the BG-led consortium rejected these conditions and stopped operating in the field since then. BG also closed its office in Tel Aviv. Following the 2007 elections, with Hamas taking power on June 14, 2007, the Islamist group announced from Gaza its intention to change the terms of the agreement, particularly as regards the share of the Palestinian side (about 10 percent). Israel refused to develop the field after its terms were rejected. To this date, almost 12 years after the field was discovered, there has been no production taking place from ‘Gaza Marine'. In recent months, in order to save face with the international Quartet, Israel announced that it is considering importing gas from Gaza, in light of the stoppage of Egyptian gas supplies. But in reality, Israel is in the process of achieving self-sufficiency in natural gas, and may even be able to export it, starting from April 2013. Despite the disruption in Egyptian gas flow, Israel is not in need of additional supplies. Hence, it is unlikely that Israel would agree to develop 'Gaza Marine'. No doubt, the failure to develop the field has wasted valuable opportunities for the Palestinian Authority and revenues that it is extremely in need of. In addition, the West Bank and Gaza are in need of this energy source, to replace high-cost fuel imports from Israel. Here, the Palestinian Authority (with the cooperation of both Fatah and Hamas) must reach an agreement with markets in the region, first with the Palestinian market itself, and then in Jordan. The reserves held by 'Gaza Marine' are relatively limited, but it is possible for Palestinian gas to cover a part of Jordan's needs, especially after the disruption of Egyptian gas supplies. * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
