Is gov't serious about BG gas deal?

Energy group sets deadline as two sides continue to haggle over price.

By MATTHEW KRIEGER
September 6, 2007 20:30
3 minute read.
british gas 88 298

british gas 88 298. (photo credit: Courtesy)

 
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BG Group plc is accusing the Israeli government of dragging its feet in the ongoing negotiations over the purchase of natural gas from the company's gas field off the coast of Gaza and said that it will only wait another "two to three months" before proceeding with its alternative plan to sell the gas to Egypt. "No one can accuse us of being impatient - we have been waiting for the Israelis to make a serious offer, but our patience can only be stretched so far," BG Vice President Nigel Shaw told The Jerusalem Post in an exclusive interview this week. "I have to ask - where does this deal rank on the government's priorities and is the government really serious about making it happen." The primary sticking point, according to Shaw, is price. "The Israelis think that if they wait long enough, we will bring down the price," said Shaw. "But we are a $50 billion company, and while we want to make this sale, we can just as easily sell the gas to another buyer." Meanwhile, the longer it takes the government to complete the deal, the larger the price gap becomes between what BG is asking and Israel is offering for the gas. "Every month the price of gas is going up and, therefore, they are costing the country a lot of money," Shaw explained. Yarom Ariav, the primary negotiator for the Finance Minister declined to comment for this article while Hezi Kugler, who's handling negotiations for the National Infrastructures Ministry had not responded to a request for comment by press time. Shaw's comments stand in direct contrast to the comments made two months ago by an Infrastructures Ministry official who told the Post that "the deal, in principle, is really almost done" and denied that the deal would breakup over price difference. Israel began talks with BG in February 2006 and said in May of that year that it expected to buy 1.5 billion cubic meters of gas from BG annually starting in 2009. Soon after, BG broke off talks with Israel and said that it preferred bringing gas to Egypt to be liquefied and then shipped by tankers to the US, Europe and the Far East. Talks resumed in July 2006 and, in April of this year, the cabinet voted 21-to-three to grant a negotiating team formal permission to hold talks with BG on the purchase of the estimated 1 trillion cubic feet of gas, potentially worth a few billion dollars, from the Gaza Marine field. While the company waits for Israel to improve their offer, Michael Barron, Policy & Corporate Affairs Manager for the Gaza Marine unit of BG, told the Post that BG has surveyed a pipeline to Egypt and is ready to proceed with selling the gas to Israel's southern neighbor. "Instead of sending the gas north to Ashkelon we will send it south to Egypt's liquid natural gas processing plant near Alexandria." Under the original plan, the gas was to have been ready for delivery by 2011 to help Israel deal with what is expected to be a critical situation when it comes to electricity production. Shaw speculated that part of the reason the deal may not yet have been completed is that the need for the gas has not reached "crisis" proportions. "Some non-governmental people have told us that the government may no need to hurry up and finish this deal because right now there is no dire need for the gas - there are other, more serious, issues to deal with in Israel and this is being pushed aside," he said. While Shaw admitted that progress has been made over the course of the negotiations, he said, "we are inching along, when we really need to be moving ahead at a much faster pace."

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