Economic Issues

The Gas Fields off Gaza: A Gift or a Curse?

Overview

Thirteen years after the discovery of gas fields off the coast of Gaza, efforts to develop them remain deadlocked despite the international backing the project enjoys. Meanwhile the besieged Gaza Strip suffers prolonged power cuts and the Palestinian economy bears a huge financial cost - as do the Western taxpayers keeping it afloat. Al-Shabaka Program Director Victor Kattan discusses the actors and amounts involved as well as the reasons why the project has stalled and recommends some policy options to break the deadlock.

A Resource Out of Reach

The Palestine Electricity Company and the Egyptian General Petroleum Corporation recently concluded an agreement to import Egyptian gas across the Rafah border. In time, this agreement could bring relief to the residents of the Gaza Strip who have been plagued by chronic fuel shortages with power outages of up to 18 hours a day. The gas could also benefit the Palestinians of the West Bank whose electricity is imported from Israel at high prices. But why does the Palestinian Authority even need to purchase and import gas from Israel and Egypt at considerable expense when two gas fields remain undeveloped off the Gaza coast?

The question is pertinent because there has been an agreement for 13 years between Consolidated Contractors Limited (CCC), the British Gas Group (BG Group) and the Palestine Investment Fund (PIF) to develop and commercialize the Gaza fields. In 2000 and 2002, the development studies undertaken by BG Group concluded that the fields were economically feasible. In other words, Gaza, rather than being one of the poorest places on earth, could be one of its richest, if only the development and commercialization of this precious natural resource off its own coast could be given the go-ahead.

Moreover, the gas would benefit the Palestinian people as a whole. For example, West Bank Palestinians could also utilize the gas from the Gaza gas fields to power electricity stations in the West Bank, and reach self-sufficiency in electricity generation that would achieve significant savings to the economy. Indeed, in 1999 the late Yasser Arafat famously hailed the discovery of the two gas fields as “a gift from God to our people”. But since their discovery 13 years ago, not a single cubic foot of gas has been extracted from the ocean floor. So why is the gas still in the ground? To answer this question, it is necessary to revisit the major actors involved in the agreement, as well as the agreement itself, before proposing some policy options on how to get the fields developed.

How Much Gas & Who Would Develop It

Within Gaza’s territorial waters, there are two main gas fields. Gaza Marine, the main field, is located 603 meters below sea level, 36 kilometers west of Gaza City. The second smaller field, the “Border Field” straddles the international boundary separating Gaza’s territorial waters from Israel’s territorial waters. According to the BG Group website, the reserves found in the two wells are estimated to be 1 trillion cubic feet (tcf). CCC believes that there are 1.4 tcf. To put this into perspective, Iran has 991.6 tcf of natural gas so this is not a massive quantity of gas, but it is still more than sufficient to meet Palestinian needs for the next 15 years, the time when it is estimated that the resource would be depleted at current Palestinian consumption levels in Gaza and the West Bank.