Old sores inflamed in Israel

Traditionally, the international energy majors that partner big Arab firms have hesitated to do business with Israel. But as Israel and Persian Gulf states find common cause against Tehran, this seems to be changing.

But to complicate matters, the Palestinian Authority also claims rights to Israel's gas deposits 30 kilometers (19 miles) off its shore.

"The fields are entirely within Palestinian territorial waters, as defined by the Oslo Accords," Tareq Baconi, Crisis Group's analyst for Israel/Palestine and Economics of Conflict, told DW. "So in international law, Palestinians should have full sovereignty in determining how they use their own natural resources."

DW contacted the Israeli energy ministry for comment but has received no reply. 

The finds

The discovery of a large gas field, Tamar, off the coast of Israel in 2009 opened up a new era for the Eastern Mediterranean as an energy hot spot. 

At the time, the gas field was the most prominent field ever found in the subexplored area of the Levantine Basin, which covers about 83,000 square kilometers. 

Read more: Gas, pipeline dreams and gunboat diplomacy in Mediterranean

Several alternatives are being considered by Egypt, Cyprus and Israel to transport the energy to markets in Europe and one of two options will likely happen: the expensive and technologically complex EastMed pipeline or developing Egypt's LNG facilities.

Israel and the US are pushing for the EastMed pipeline. The EU is seeking new sources to diversify away from Russia, as internal production falls and demand is set to spike, and the region is close, gas-rich and relatively cheap — or could be.

The Eastern Mediterranean is estimated to have about 2,100 billion cubic meters (bcm) of so far untapped gas. The EU's consumption was 458.5 bcm in 2018 and 465.7 bcm in 2017, according to BP Stats Review 2019. 

EastMed would be a 2,200-kilometer pipeline that would pass under the sea base of the islands of Cyprus and Crete and connect to Europe in Greece. 

"But EastMed is a technically difficult project, and politically it is made more complicated by the role of Turkey and the Cypriot waters through which it would have to go," Tim Boersma, director of Global Natural Gas Markets at Columbia University's SIPA Center on Global Energy Policy, told DW.

Palestine at the back of the line

There are several large projects in the US' recently unveiled $50 billion plan for Israeli-Palestinian peace, including $1 billion in grants, loans and private sector financing for the development of a natural gas field offshore of Gaza. The gas field, Gaza Marine, is owned by the Palestine Investment Fund (PIF).

PIF Chief Executive Officer Mohammad Mustafa told The National in April that it normally takes two to three years to develop it [an offshore gas field]. "Assuming no political difficulties, we hope to be able to start next year," he said. 

Gaza Marine is estimated to hold up to a trillion cubic feet of gas, equivalent to Spain's consumption in 2016, according to the US Energy Information Administration. The project is expected to generate revenues of around $2.4 billion (€2 billion) in royalties and taxes over its life, estimated to be 15 years.

At present, the West Bank and Gaza rely on Israel to meet almost all their energy needs, and the Palestinians pay about $2 billion a year to Israel to cover their energy needs.

So the development of the field would be "transformational," according to Robin Mills, chief executive of Qamar Energy. 

Crossed lines

British Gas (BG Group) and its partners had originally been granted oil and gas exploration rights in a 25-year agreement signed in November 1999 with the PA. A precondition of the deal was that surplus gas would be supplied to Israel. Tel Aviv refused to enter into a deal and the problems started, although with relatively small finds at that stage, the issue was just one of many in the ensuing Israel-Gaza conflict. 

In 2018, Shell relinquished its 55% stake in the field that it took over as part of its acquisition of BG Group in 2016. PIF then became the field's sole owner. It is searching for an operator and buyer for a 45% stake.

"The PA doesn't decide unilaterally on projects like this, and if Israel gets even the slightest whiff of Hamas gaining financially from  this kind of precept, it will pull the plug," says Boersma. "As Kushner's plan rightly suggests, there is a huge potential upside to Israel-PA collaboration. But it is conditioned on there being peace, and there is no peace."

Plans for the development of Gaza Marine predate Israel's discovery of its own gas reserves, Baconi says. "Israel's opposition to the development of the field, now couched in security arguments, predate Hamas's takeover of the Gaza Strip," Baconi says.

"Israel has an economic incentive to ensure Palestinians remain reliant on Israeli energy, as a captive market, then develop their own resources," Baconi says.

Putin in the wings?

In January Palestinian President Mahmoud Abbas met with Russian President Vladimir Putin to officially sign an investment agreement aiming to develop the Gaza offshore gas field. AFP reported that there was talk of Russia investing $1 billion.