The Israel Corporation, controlled by Sami Ofer and his son Idan, is negotiating with energy giant BG (formerly British Gas) to buy its holdings in the Gaza Marine natural gas field off the Gaza coast.
In addition, Israel Corp. owners have been attempting to sound out government authorities as to the validity of the BG's franchise for the field, which it received from the Palestinian Authority. The Israel Corporation has also been inquiring into whether the state will support such a move.
Israel is expected to face a natural gas shortage withing five years, and this business opportunity has attracted many new faces to consider entering the local market. One of these is The Israel Corp., the country's largest private customer of natural gas.
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The law regulating the natural gas market limits the company in its ability to control a natural gas source, as it already controls the Oil Refineries. However, even if the Ofers decide to buy BG's holdings anyway, the demand for the gas from The Israel Corp. and its subsidiaries, Israel Chemicals and the refineries, may in itself make the deal worthwhile.
BG received the right to explore for gas and oil off Israeli shores in the 1990s. In 2000 the firm discovered a potential field off Gaza, and estimates state that it holds about 30 billion cubic meters of gas.
In a controversial move at the time, then-prime minister Ehud Barak relinquished Israeli claims to the field and allowed the Palestinian Authority to hold 10% of the rights, through an international investment fund. The PA is expected to enjoy 12.5% of revenues from the field, estimated at $4 billion. The PA gave BG the franchise to exploit the field, and a 90% share. After the field starts operating, it will have to give 30% to Lebanese infrastructure company CCC, privately owned by the Lebanese-Christian Khoury family. CCC owns the Gaza power plant.
After a decade of stillborn talks between BG and Israeli customers, the company announced last January that it was halting negotiations and closing its Israeli office. That is when a number of firms started showing interest in purchasing BG's share of the gas field. Two years ago, one of Israel's two natural gas suppliers, Tethys Sea, conducted negotiations with BG, but no agreement was ever reached. Israel's other natural gas supplier is a joint Egyptian-Israeli producer, EMG.
BG has denied the report.
The Israel Corporation denied it is holding talks with BG. They added, "There is no truth to the report that the group has approached government bodies to receive guarantees." Nevertheless, the group said: "The Israel Corporation needs and will need in the future natural gas sources, as it is a large energy consumer through its factories and planned power plants. Therefore we are preparing and will prepare to find various energy sources."
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