BG Gaza gas deal may take months, Israel says

Company may consider selling the gas to Egypt instead but will "continue talking."

gaza gas 88 298 (photo credit: AP)
gaza gas 88 298
(photo credit: AP)
Negotiations with BG Group Plc to secure future gas supplies from a coastal field off the Gaza Strip could take several months, according to the National Infrastructure Ministry. National Infrastructure Minister Binyamin Ben-Eliezer met with BG vice president Nigel Shaw in Tel Aviv this week, ministry spokeswoman Hanit Ganish said in Jerusalem. "The negotiations are still going on," she said. Commenting on an article in The Jerusalem Post on Thursday that said a deal with BG was "imminent," Ganish said it could be a few months away. "The purpose is to reach a deal, and so we're going to continue talking." BG wants to develop the Gaza Marine gas field and build pipelines to sell gas to Israel. Under the initial proposals, BG would transport gas by pipeline to Ashkelon Port, without crossing the Gaza Strip. Should the deal fail, BG has said it would consider selling the gas to Egypt instead. BG won't comment on the possible time frame for completion and there are "commercial terms which are yet to be finalized," Trina Fahey, a spokeswoman for the Reading, England-based company, said in an e-mailed statement. The company also faces a petition by an Israeli competitor, Yam Thetis, which has asked the High Court of Justice to block the government's plan to buy BG gas. Yam Thetis owns natural-gas reserves off the Mediterranean coast that are currently Israel's sole source of the fuel. The petition contends that Israel wrongfully gave up rights to the field to the Palestinian Authority, Delek Drilling LP, one of the partners in Yam Thetis, said in a June 25 statement. It valued the field at $4 billion. "The Supreme Court of Israel is still considering a recent petition lodged by Yam Thetis and that process is ongoing," BG's Fahey said. Israel and BG are currently negotiating a term sheet, which will set out in brief the main points of the deal, the government said in a document submitted to the High Court in response to the Yam Thetis petition. The two sides are also considering signing a letter of agreement, stating their intent to negotiate a binding contract, the government said. "Even if the two sides reach an agreement on the preliminary documents... this will not create a binding agreement," government lawyer Orit Koren wrote in the July 11 response. "The two sides need at least six months until negotiations develop into a legally binding agreement." The deal was further complicated last month when Hamas seized control of Gaza. Hamas wants to renegotiate the PA's 1999 contract with BG so it can get more money from any gas sold to Israel, Muhammad al-Madhoun, the director of Hamas leader Ismail Haniya's office, told the Palestinian Information Center, a Hamas Web site last month. Among the points reportedly being negotiated by partners in the deal is how to ensure that any money going to the Palestinians isn't used to finance terrorism. Negotiators are said to be trying to agree on a foreign trustee who would supervise distribution of the funds. (Bloomberg) With reporting by Alisa Odenheimer in Jerusalem and Maher Chmaytelli in Nicosia.