GAZA: Offshore lifeline

16 September 2005
Hope is returning to Gaza. With the Israeli withdrawal almost complete, Palestinians will soon be masters of their own domain, if not their borders. The overcrowded Gaza Strip, with its poverty, unemployment, crumbling infrastructure and shortage of clean water, may not look like much of a prize. However, this tiny territory has one key, as yet unexploited, natural asset - gas.

The Gaza Marine gas field sits 35 kilometres offshore. Estimates put the amount of gas under the seabed at a healthy 1.2 trillion cubic feet. The first well in the non-associated, virgin field drilled in 2000 tested at 37 million cubic feet a day (cf/d) of gas on a 48-64-inch choke - and that is with the flow rate constrained by the testing equipment.

The UK's BG Group, which operates the 25-year exploration licence, reported that a second well drilled in the same year was not tested but 'confirmed a major gas discovery'. Drilling for a third exploration well in the Gaza Marine gas field is scheduled to start in September. The well will test the possible extension of the offshore-Israel, Noah South (Border) field into Gaza Marine. Atwood Oceanic's Southern Cross rig, with a drilling depth of 20,000 feet and water depth of 2,000 feet, is making its way from Australia to bore the well.

The Palestinian Authority (PA) has been quick to recognise the benefits of exploiting the field and in 2002 approved a development plan. According to Palestinian Energy & Natural Resources Authority chairman Assam Shawa, the PA could bring in some $50 million-70 million a year in revenues from the Gaza Marine field. The gas could also go some way to averting the West Bank and Gaza's looming energy crisis. The PA's Rapid Impact Plan lists key projects to kick-start economic recovery in the months following the Israeli pullout from Gaza; to 'facilitate operations of the first offshore gas well' is one of them.

BG, which holds 90 per cent of the exploration licence, Athens-based Consolidated Contractors International Company (CCC), which owns the remaining 10 per cent, and the PA are deciding how best to exploit the field. CCC and the PA through the Palestine Investment Fund (PIF) have an option to increase their share to a combined 40 per cent at the development stage of the project. Crucially, Gaza has gas to supply, but lacks the domestic demand - there is no gas infrastructure in Gaza or the West Bank, nor are there refining facilities. Electricity is either bought directly from Israel or generated by power plants fired by diesel feedstock, also bought from Israel. Households buy gas in canisters imported from Israel. So the key questions remain: who does the PA sell the gas to and how does it get there?

Options under consideration include exporting the gas to foreign markets via the Egyptian network, a long-tabled plan to sell gas to Israel and bringing gas onshore for use in the independent power project (IPP) in Gaza.

The most commercially promising of these plans appears to be the scheme to export gas via Egypt. Cairo and the PA signed a memorandum of understanding (MoU) in July to build a 50-60-kilometre subsea pipeline from the Gaza Marine field to El-Arish in northern Sinai. Gas could be processed at El-Arish or sent on to the BG liquefied natural gas (LNG) plant at Idku, 40 kilometres east of Alexandria. From there it would be exported to more profitable markets in Europe and the US. BG has been in negotiations with Egyptian General Petroleum Corporation (EGPC) and Egyptian Natural Gas Holding Company (EGAS) to establish the broad commercial structure of the pipeline deal, but sources close to the talks say project go-ahead is a long way off. Once an agreement is reached, Shawa estimates the pipeline will take two years to build.

Selling Gaza's gas locally does not seem to be on the agenda - except possibly to Israel. BG has been trying to gain a foothold in the

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