Israel desperately covets Gaza’s gas as a ‘cheap stop-gap’ yielding revenues of $6-7 billion a year, writes Nafeez Ahmed. The UK’s BG and the US’s Noble Energy are lined up to do the dirty work – but first Hamas must be ‘uprooted’ from Gaza, and Fatah bullied into cutting off its talks with Russia’s Gazprom.
Black smoke billows from the UNWRA compound set ablaze by Israel in Operation Cast Lead, 15th January 2009. The compound was burned to the ground. Photo: Al Jazeera English via Flickr.
It is clear that without an overall military operation to uproot Hamas control of Gaza, no drilling work can take place without the consent of the radical Islamic movement.
“Israel’s current offensive in the Gaza Strip is by no means an energy war”, writes Allison Good in The National Interest in a response to my Ecologist / Guardian article exposing the role of natural gas in Israel’s invasion of Gaza.
This “has not stopped conspiracy theorists from alleging that the IDF’s Operation Protective Edge aims to assert control over Palestinians gas and avert an Israeli energy crisis.”
Describing me as a “self-proclaimed” international security journalist engaging in “shoddy logic, evidence and language”, Good – who works as a contractor for Noble Energy, the Texas-based oil major producing gas from Israel’s reserves in the Mediterranean Sea – claims that:
“Israel is nowhere close to experiencing an energy crisis and has no urgent or near-future need for the natural gas located offshore Gaza. While Israel gains nothing for its energy industry by hitting Gaza, it stands to lose significantly more.”
If you don’t like the evidence – ignore it
Yet Good’s missive is full of oversimplifications and distortions. She points out that Israel’s recently discovered Tamar and Leviathan fields together hold an estimated 30 trillion cubic feet of gas – which, she claims “are expected to meet Israel’s domestic energy needs for at least the next twenty-five years” while simultaneously sustaining major exports.
“Israel is not using Operation Protective Edge to steal the Gaza Marine gas field from the Palestinians, and it is irresponsible to claim otherwise”, she asserts. Yet her blanket dismissal simply ignores the evidence.
In early 2011, Prime Minister Benjamin Netanyahu proposed new negotiations with Palestinian Authority President Mahmoud Abbas Abu-Mazen over development of the Gaza Marine reservoir.
“The proposal was made in view of Israel’s natural gas shortage following the cessation of gas deliveries from Egypt”, reported the Israeli business daily Globes.
US-based Noble’s Gaza gas grab
But since 2012, Israel began unilaterally developing the Noa South gas reserve in the Mediterranean off the coast of Gaza, estimated to contain about 1.2 billion cubic metres.
According to Globes, Israel had previously “refrained from ordering development of the Noa field, fearing that this would lead to diplomatic problems vis-à-vis the Palestinian Authority” as the field is “partly under the jurisdiction of the Palestinian Authority in the economic zone of the Gaza Strip.”
Allison Good’s employer, Noble Energy, “convinced” Israel’s Ministry of National Infrastructures that the company’s drilling would “not spill over into other parts of the reserve.”
“Israel wanted to cooperate with the Palestinian Authority to develop Israel’s Noa South reservoir, which spreads into Gaza’s maritime area”, reported Globes. “In the end, Israel decided to develop the Noa reservoir without any official agreement.”
Israel’s secret gas talks
Despite repeated breakdowns in Israeli-Palestinian negotiations to exploit the Gaza Marine gas reserves, Israel’s interest only accelerated.
In May last year, Israeli officials were in “secret talks“ for months with the British Gas Group (BG Group), which owns the license over Gaza’s offshore resources, over development of the reserves.
According to the US Energy Information Administration (EIA), the Gaza Marine holds about 1.6 trillion cubic feet in recoverable gas, and “offshore Gaza territory may hold additional energy resources.”
Determining the size of these additional resources requires further exploration which, however, is limited by “uncertainty around maritime delineation between Israel, Gaza, and Egypt.”
Senior Israeli sources said that the Gaza gas issue was expected to come up in US President Barack Obama’s talks with Israeli leaders during his visit to Israel at the time.
The Palestinians – who own the gas – were excluded
The talks also included Netanyahu’s personal envoy Yitzak Molcho and former British Prime Minister Tony Blair in his capacity as Quartet (US, UK, EU, Russia) special envoy to the Middle East.
Palestinian leaders, though, were excluded from these talks due to “political sensitivities and the complex relationship between the Palestinian Authority and Hamas.”
By October that year, the Financial Times reported that Netanyahu remained “very supportive” of the Gaza Marine gas project “which would see the fields exploited on behalf of the Palestinian Authority by investors led by BG Group.”
If all went ahead, the fields could be producing gas by 2017, generating “$6bn to $7bn of revenues a year.” An “energy industry source” cited by FT told the newspaper that:
“Israel may now see Gaza Marine as providing a useful alternative source of gas, especially at a time when its pipeline imports from Egypt have been disrupted due to unrest in the Sinai peninsula.
“Mr Netanyahu’s government faces criticism and a court challenge from opposition politicians over its plans to export up to 40 per cent of natural gas produced from its own, much larger Mediterranean gas reserves.
“Israel, the industry source said, may feel that gas from Gaza would allow it to reduce its reliance on the consortium led by Noble and Delek Energy now developing Israel’s Tamar and Leviathan offshore gasfields.”
Quashing the gas deal
But as Good herself noted in the same month in Dubai’s The National, there remained one problem:
“Hamas retains de facto jurisdiction over the Gaza Strip and, consequently, over Gaza Marine. The PA cannot negotiate on behalf of Hamas, and any agreement that Israel could make with Ramallah would certainly be declared null and void in Gaza. Israel also still refuses to negotiate with Hamas.”
And despite negotiations to exploit Gaza’s gas speeding ahead between Israeli government and BG Group officials, Netanyahu “quashed” a $4 billion economic stimulus initiative proposed by US Secretary of State John Kerry which “included a proposal for the exploitation of Gaza Marine.”
Why was Netanyahu simultaneously pushing forward negotiations over Gaza’s gas, while also blocking and excluding any deal that would grant any Palestinian entity inclusion in the deal?
Israel’s gas reserves inflated, consumption understated
As noted in my article, and ignored by Noble Energy contractor Allison Good, the drive to access Gaza’s gas was likely magnified in the context of a report by Israeli government chief scientists Sinai Netanyahu and Shlomo Wald of the Energy and Water Resources Ministry.
That report was submitted to the Tzemach committee tasked with drafting a national gas policy, but was covered up until Ha’aretz obtained a leaked copy.
The Tzemach committee recommended the government to export 53% of its gas – reduced to 40% this June – amidst widespread allegations of “improper conduct” and deliberate inflation of reserve figures.
Indeed, according to the report of the Israeli chief scientists, the government’s gas policy is based on underestimating future Israeli demand and overestimating the country’s gas production potential.
In reality, the scientists said, Israel will need “50% more natural gas than has been forecast until now and its offshore reserves will be empty in less than 40 years.”
Israel’s looming gas crunch
The most optimistic estimate received by the Tzemach committee was that Israel would need 364 billion cubic meters of gas. In contrast, the chief scientists argued that by 2040, Israel would need 650 billion cubic meters, after which the country would consume 40 billion cubic meters of gas per year.
At this rate, “even if Israel chooses not to export any gas, it will entirely exhaust its offshore reserves” by 2055. This assessment, further, ignores that “not all the gas is likely to be commercially extractable.”
The upshot is that Israel cannot simultaneously export gas and retain sufficient quantities to meet its domestic needs.
And if Israel exhausts its gas resources “it will be forced to return to oil to meet its energy needs, even though global oil production is expected to start declining by 2035.” The scientists noted that “if oil output drops by even 15%, its price is likely to spike by 550%.”
These concerns are compounded by the consistent under-performance of several of Israel’s recent gas discoveries compared to the hype, such as in the Sara, Myra, Ishai, and Elijah-3 reserves.
As Israel faces a 2015 gas shortage, Gaza’s gas is a cheap stop-gap
Sohbet Karbuz, head of hydrocarbons at Observatoire Méditerranéen de l’Energie (OME) in Paris, points out that much of the gas was not in hindsight commercially recoverable. As he writes in the Journal of Energy Security,
“There is no certainty that it will be commercially possible to produce any percentage of contingent resources.”
Israel’s gas export policy, he thus remarks with reference to the much-vaunted Tamar and Leviathan fields, is based “partly on a mixture of hype and hope on the one hand, and reserves and prospective resources on the other.”
Drilling in Israel’s Leviathan reserves which was supposed to begin in December 2013 has been postponed to later this year due to high gas pressures at lower depths. In the meantime,reports Jewish Business News,
“Postponing Leviathan’s development could have major repercussions on Israel’s economy, which will face a natural gas shortage from 2015.”
Israel needs the Gaza Marine as a stop-gap, but wants it cheap, and is unwilling to exploit the reserves through any Palestinian entity.
UK Foreign Office – ‘Israel won’t pay the full whack’
Official British Foreign Office (FCO) documents obtained under the Freedom of Information Act by the Palestinian think-tank Al-Shabaka based in Washington DC shine new light on this.
According to email correspondence between the FCO’s Near East Group and the British Consulate General in Jerusalem in November 2009, Israel had refused to pay market price for Gaza’s gas. One Foreign Office official said:
“Israel won’t (i) pay the full whack [for the gas] (ii) guarantee to give a certain cut direct to the PA. So BG aren’t getting the gas out of the sea-bed. They are content to exploit other reserves and come back to this one when the price is right.”
Another email dated 29th June 2010 noted that despite large reserves of gas discovered between Israel and Cyprus giving Israel the opportunity to become a net gas exporter, Israeli officials saw potential for the Gaza Marine to function as “a stop-gap measure before the new finds come fully on stream.”
On 8th February 2011, UK ambassador to Israel Matthew Gould wrote to the FCO explaining that Israel intended to therefore seek the development of Gaza’s gas reserves as this would
“enhance Palestinian opportunities; reduce Gaza’s dependence on Israel; and diversify Israel’s sources of gas. [redacted] added that this last point had been given added topicality by the attack this weekend on the gas pipeline from Egypt.”
British Gas and Israel collude to exclude Hamas
The biggest obstacle as far as Israel is concerned is Hamas, the Palestinian Authority (PA), and the prospect of a strong independent Palestinian state.
An April 2014 policy paper for the European Parliament’s directorate-general of external policies points out that “distrust” between all these parties, particularly “political divisions on the Palestine side” have “hindered the negotiations.”
After Hamas was elected to power in the Gaza Strip in 2006, the group declared from the outset that Israel’s agreements with the PA were illegitimate, and that Hamas was the rightful owner of the Gaza Marine resources.
But BG Group and Israeli officials had come up with a strategy to bypass Hamas. A BG official told the Jerusalem Post in August 2007 that
“BG and Israel have arrived at an ‘understanding’ that will transfer funds intended for the PA’s Palestinian Investment Fund into an international bank account, where they will be held until the PA can retake control of the Gaza Strip.”
Under this plan, “Both Israel and BG intend that until the PA is able to remove Hamas from power in the Gaza Strip, the money will be held in an international bank account. Neither side wants the money to go to fund terror-related activities.”
Hamas must be uprooted from Gaza
The plan was, according to an Infrastructures Ministry official cited by the Jerusalem Post, about “circumventing the possibility that Israeli money will end up in the wrong hands” by arranging “a payment plan” that would “completely exclude Hamas”.
In the same year, incumbent Israeli defence minister Moshe Ya’alon – then former IDF chief of staff – explicitly advocated that the only way in which Gaza’s gas could be developed was through an Israeli military incursion to eliminate Hamas.
Ya’alon’s concern was that “Palestinian gas profits would likely end up funding terrorism against Israel”, a threat which “is not limited to Hamas” and includes the Fatah-run PA. As preventing gas proceeds from “reaching Palestinian terror groups” is “impossible”, Ya’alon concluded:
“It is clear that without an overall military operation to uproot Hamas control of Gaza, no drilling work can take place without the consent of the radical Islamic movement.”
Ya’alon’s concerns voiced in 2007 – and the prospect of using military force to begin gas production in Gaza – remain relevant today. As the man in charge of Israel’s current war on Gaza, Ya’alon is now in a position to execute the vision he had outlined a year before Operation Cast Lead.
Extending Israeli sovereignty over Gaza
Thus, the exclusion of Palestinian representatives – whether Fatah or Hamas – from the latest negotiations between Israel and BG Gas is no accident.
While PA president Mahmoud Abbas was independently seeking to reach a deal with Russia’s Gazprom to develop the Gaza Marine, Netanyahu had already “made explicitly clear that he could never, ever, countenance a fully sovereign Palestinian state” – which is why he deliberately torpedoed the peace process, according to US officials.
The other factor in this equation is the legal challenge to the Gaza gas proposals from Yam Thetis, a consortium of three Israeli firms and Samedan Oil.
Samedan is a subsidiary of the same US oil company, Noble Energy, that employs National Interest contributor Allison Good, and which has been operating in the Noa South field that overlaps Gaza.
Yam Thetis’ principal argument was that “BG had no right to drill in Palestinian waters as the Palestinian Authority is not a state and cannot grant such a right to drill in offshore Gaza.”
The upshot is that Noble Energy’s consortium should have the right to extend its drilling into the Gaza Marine on behalf of Israel – and at the expense of the Palestinians.
Removing the obstacles – Hamas and the PA
Since the Oslo Accords, although the PA’s maritime jurisdiction extends up to 20 nautical miles from the coast, Israel has incrementally reduced Gaza’s maritime jurisdiction by 85% from 20 to 3 nautical miles – effectively reversing Palestinian sovereignty over the Gaza Marine.
But with Israel’s determination to access Gaza’s gas accelerating in the context of the risk of a 2015 energy crunch, the fundamental obstacle to doing so remained not just the intransigent Hamas, but an insufficiently pliant PA seeking to engage the west’s arch-geopolitical rival, Russia.
Israel’s own commitment to blocking a two-state solution and bypassing Hamas meant that its only option to bring Gaza’s gas into production was to do so directly – with, it seems, the competing collusion of American and British energy companies.
The IDF’s Gaza operation, launched fraudulently in the name of self-defence, is certainly though not exclusively about permanently altering the facts on the ground in Gaza to head-off the PA’s ambitions for autonomously developing the Marine gas reserves, and to eliminate Hamas’ declared sovereignty over them.