Energy resources can deliver financial benefits, and present new prospects for the economic development of Palestine and Jordan.
The potential for meaningful Palestinian gas resources is valid provided that exploration and development proceeds with the Gaza marine gas field. The Gaza marine field’s development plans forsee the construction of well-heads on the sea-bed, and a sub-sea pipeline from the field to the shore, making landfall at the coastal Israeli city of Ashkelon. The construction of a receiving terminal in Ashkelon is expected to facilitate the transfer of Palestinian gas into Israel’s natural gas main network across the country.
Notably, the Gaza marine field is shallower than both the Israeli Tamar and Leviathan gas fields and closer to the coast making extraction logistically easier. But this project has not moved forward due to political tensions between Israel, the Palestinian Authority (PA), and Hamas prompting British Gas (BG) to concede its 55 percent stake in the field to Royal Dutch Shell. Royal Dutch Shell relinquished its rights in the Gaza marine field in early 2018 after failing to find a buyer suggesting that the project is not politically viable in the short-term.
It is deemed that Gaza Marine’s future depends on Israeli permission to the field’s development especially now that the Palestine Investment Fund (PIF) is looking for an operator and buyer for a 45 percent stake. Currently, Energean Oil and Gas, a Greek medium-sized energy company that operates other Israeli gas fields, is in discussions with the Palestinians to acquire and operate the Gaza marine field. The Gaza marine gas field is estimated to contain approximately 1 trillion cubic feet (tcf) of gas that is sufficient to satisfy the electricity needs of the Palestinian market and some gas can be sold to Jordan that has already signed a preliminary agreement for the import of gas from the field via a pipeline across Israel.
Palestinians could turn their natural gas holdings into a solution to the ongoing electricity crisis in Gaza, despite the internal divisions between the PA and Hamas and political disputes between Israel and the PA that have been major impediments to exploiting the wealth of resources. The Palestinian electricity crisis can be evidenced in that fuel supply to the Gaza power plant is intermittent and expensive. Also, Egypt’s transmission lines that connect to Gaza have become non-operational, cutting electricity supply from Egypt to zero. As a result, the Strip depends on the 120 megawatts (MW) per day imported from Israel.
Egyptian mediation is important to reconcile disputes between Hamas and the PA so that the latter can reassume its governing role in Gaza and electricity supply can be normalized. The so-far unexploited Gaza Marine gas field could remedy to a certain degree the Strip’s energy problems. For this reason, talks between the Israeli government and the PA need to advance to make headway on Gaza marine gas field’s exploration as part of a larger effort to develop the Palestinian economy. The exploitation of the Gaza Marine gas field should be incentivized as its benefits include a reduced need for Israel to consume its own natural gas to generate electricity for the Palestinian territories and a more stable power supply for that area. On a general note, international donors like the World Bank and other international financial institutions could fill funding gaps for energy infrastructure projects in Palestine.
Coming to neighboring Jordan, natural gas from Israeli offshore fields in the Mediterranean Sea is a reliable source of energy for the kingdom despite popular opposition to reliance on Israel. The export of gas from Tamar field has started smoothly to Jordan’s Arab Potash and Jordan Bromine companies that are connected to Israel’s national pipeline network in line with a 15-year, 500 million dollars contract. Additionally, the agreement signed between the Jordanian National Electric Power Company (NEPCO) and Leviathan gas field’s partners Noble Energy and Delek is considered economically feasible. The price of gas is competitive when compared against the price of gas under Jordan’s previous contract with Egypt. The reason lies in that NEPCO has a take-or-pay commitment for a minimum annual volume of gas according to the signed export agreement, and price of gas is not only linked to Brent oil prices, but also includes a floor price. With the prospect of regional instability, it is estimated that reliable Israeli gas imports could strengthen Jordan’s energy security.
Currently, there are two major pipeline projects underway in Jordan: first, construction of a new gas pipeline by 2019 that will connect the Israel Natural Gas Lines (INGL) transmission system to the Jordanian border. The second project is the construction of a pipeline at the Israel-Jordan border to be connected to the existing pan-Arab pipeline across Jordan. The capacity of the pan-Arab pipeline can annually supply up to 10 billion cubic meters of Israeli gas via Jordan to Egypt. It is noteworthy that the kingdom is expected to gain revenues in the form of royalties paid by oil companies.
The pipeline project crossing the Israeli and Jordanian borders to connect to Egypt is viewed not only as a milestone in regional gas cooperation, but also supports real Jordan-Israel-Egypt normalization. But for the Jordanian people to realize the dividends of peace, cooperation should expand to desalination, energy and agriculture projects. Also, European and international banking and financial institutions like the World Bank and US development agencies like USAID should provide loans or grants to foster Jordan’s turn to renewable energy. This way, Jordan that imports 98 percent of its energy needs will be supported to meet national plans that foresee a 20 percent production of energy from renewable projects till 2020.
Evidently, a unique opportunity for regional energy security and cooperation has surfaced enabling the emergence of peace dividends due to business commitments and active political will. What has become crystal clear over the last decade is that through energy cooperation, peace dividends tend not to be a myth but a reality.
