Mar. 14, 2013 (TSR-Platts) – The UK’s BG Group is holding “secret talks” on the possible development of the Gaza-Marine offshore gas field, Israeli economic daily Globes reported Thursday.

A spokesman for BG told Platts the company does not speculate about “what we may or may not do with the assets in our global portfolio.”

However, the spokesman noted that in 2007 the company withdrew from negotiations with the Israeli government for the sale of gas from Gaza-Marine, and in 2008 BG closed its office in Israel. An Israeli Energy and Water Ministry spokeswoman declined to comment on the report.

The Globes report cited unnamed sources as saying the reservoir would be developed for use by Palestinians in the Gaza Strip and West Bank.

Gaza-Marine, located 35 kilometers (about 22 miles) off the Mediterranean coast of the Gaza Strip, was discovered by BG in 1999. The company owns a 60% stake in the field, which has estimated gas resources of 30 billion cubic meters. The Lebanon-based Houri family owns 30% and the rest is controlled by the Palestinian Investment Fund.

The cost of developing the field is estimated at around $2 billion and it is expected to take three years to bring it online once a decision is taken to develop it.

Discussions regarding Israel buying gas from the field have been held on an on-and-off basis for a few years. Two years ago, Prime Minister Benjamin Netanyahu officially asked Palestinian Authority President Mahmoud Abbas to resume negotiations on the sale of gas to Israel and its use by the Palestinians.

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In September, BG denied it was involved in talks between Israel and the Palestinians over the development of the field. An energy ministry official said at the time that Israel supported the development of the field.

The Palestinian Authority has plans to build four gas-based power plants on the West Bank to end its almost total dependence on Israel for electricity.

Israel and BG ceased negotiations in December 2008 after failing to reach an agreement on price. Israel lost interest in purchasing gas from Gaza-Marine following the discovery of the huge Tamar field off the country’s northern Mediterranean coast.

Israel has no formal relations with the Gaza Strip and imposed a blockade on the territory when the Hamas took over in 2007. The sources said an agreement between Hamas and Palestinian authority about future development would be necessary in order to proceed with any plans for the development of Gaza-Marine.

BUSINESS BRIEF

BG Group owns a 90% interest in, and is operator of, the offshore Gaza Marine licence.

BG Group is operator of an exploration licence covering the entire marine area offshore the Gaza Strip. BG Group drilled two successful wells in 2000 (Gaza Marine-1 and Gaza Marine-2) and resources are estimated to be around 1 tcf. In 2001, a technical review recommended a sub-sea development and pipeline to an onshore processing terminal. In 2002, an outline Development Plan was approved by the Palestinian Authority.

BG Group holds 90% equity in the licence, which would be reduced to 60% if the Consolidated Contractors Company (its current 10% partner in the licence) and the Palestine Investment Fund exercise their options at development sanction.

In 2007, BG Group withdrew from negotiations with the government of Israel for the sale of gas from the Gaza Marine field to Israel. In 2008, BG Group closed its office in Israel.

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