On February 22, 2020, the Egyptian Ministry of Petroleum announced that Egypt and Palestine had signed a memorandum of understanding on the development of gas fields in the Gaza Strip. The memorandum was signed by Egyptian Oil Minister Tariq Mullah and the head of the Palestinian Investment Fund, an advisor to the chairman of the Palestinian Authority, Mohamed Mustafa.

The Gaza Marine Gas Field is located 30 kilometers off the coast of the Gaza Strip in the eastern Mediterranean. It is located at a depth of 603m. Due to the dispute between Israel and the Palestinians, the development of the Gaza oil field has been put on hold for several years.

British Gas has a 90% interest in this field. If the Palestinian Investment Fund and the joint contractor company decide to exercise their option, BG’s shares will be reduced to 60%. PIF and CCC will subsequently hold 30% and 10% equity respectively.

BP discovered natural gas fields in the Gaza Sea in 1999. However, due to various political events, the exploitation of the gas fields has not started in the past few years. According to media reports, the reserves of the natural gas field are approximately 32 billion cubic meters.

The lack of clear contracts and uninterrupted natural gas supply from Gaza and guarantees of uninterrupted capital flows to the Palestinian National Authority have been hampering development in this area. Due to the dispute, the developer failed to obtain the necessary license to develop the field.

Benefits of Gaza Gas Project to Palestine

The development of the Gaza oil field is expected to benefit Israel and the Palestinian National Authority. The project is expected to bring economic, environmental and financial benefits to the Palestinians. It is estimated that within its useful life, it will generate approximately US$2.4 billion in royalties and taxes. By eliminating the need to import electricity from Israel, it will also save US$560 million annually.

The development of the Gaza oil field is expected to benefit Israel and the Palestinian National Authority. The Palestinians will also be able to substitute natural gas for the diesel currently used by the Gaza power station. This will greatly reduce the cost of power generation and reduce diesel imports from Israel. Using natural gas instead of diesel will also improve environmental conditions.

Obtaining large reserves of natural gas will enable Palestinians to invest in the development of natural gas power plants.

Project benefits to Israel

The Gaza gas field is expected to meet 10% of Israel’s energy needs. The country currently relies on Egypt for natural gas. Stable economic growth requires Israel to obtain newer energy sources. The country plans to purchase natural gas produced in the Gaza gas field to reduce its dependence on easily interrupted Egyptian natural gas.

Israel is already investing in the development of its own gas fields in the Mediterranean to improve its supply security. The Leviathan and Tamar oil fields are currently being developed. However, these oil fields are far from the coast and the development costs are high.

Gas field development will ultimately solve the power shortage problem in Gaza. At present, Gaza often suffers from frequent power outages. The news stated: "The two parties have signed a memorandum of understanding between the Gaza Strip gas field project partners represented by the investment fund, the "co-contractor" company and Egypt EGAS. Within the framework of cooperation, the two parties intend to develop the Gaza gas field and necessary infrastructure. "The news pointed out that some of the natural gas produced may be imported into Egypt.

Prior to this, on February 21, Egyptian Oil Minister Tariq Mullah visited Israel and Palestine. According to the Ministry of Petroleum, the purpose of this trip is to reach a consensus on the development prospects of the regional natural gas market and discuss cooperation matters within the framework of the Eastern Mediterranean Gas Forum, which includes 7 countries-Egypt, Palestine, Israel, Cyprus, Greece, Jordan and Italy.Editor/Huang Lijun