Gaza Gas Project

Gas is one of the most important natural resources in Palestine. Since its discovery, offshore Gaza Gas has been regarded as a unique project in Palestine, in view of the fact that Gaza Gas is the only mineral resource found in the Palestinian Territory. The natural gas reserves constitute an important and strategic source for the Palestinian economy.

In 1999, the Palestinian National Authority (“PNA”) has exclusively awarded the area offshore Gaza for hydrocarbons exploration and marketing to British Gas (“BG”)/Consolidated Contractors Company Oil and Gas S.A.L (“CCC”) consortium (“the developers”). The award was granted pursuant to the agreements signed between the PNA and the developers, granting the latter the exclusive rights to produce, process and sell commercial discoveries in the license area for a period of 25 years to start upon approval of a field development plan.

In 2000, the developers announced the discovery of proven commercial gas reserves in the Gaza Marine Field, and proven commercial gas reserves in the Border field; a field that is in territorial waters of both Gaza and Israel. The developers are currently negotiating the terms of two Gas Sale Agreements, after which only one agreement will be approved and signed between relevant parties.

Among other positive aspects of the Gaza Gas project, in addition to injecting large funds into the local economy, development of the gas fields and exporting natural gas will send positive signals about the investment environment in Palestine. Success of the Gaza Gas project will enhance investors‘ confidence in the Palestinian national economy as a result of the complicated nature of this project and the cross-border transactions and commitments it requires. Replacing gasoline with gas at the Palestine Electric Company in Gaza will reduce the current bill that the Palestinian National Authority pays to Israel to provide Palestinians in Gaza with electricity.

· 1999 The Palestinian Authority awarded the Gaza Marine license area to BG Group and its partner CCC.

· 2000 Following the acquisition of 1000sq km of 3D seismic in early 2000, as operator on the project BG group successfully drilled two wells later the same year with the first well BG Group discovered the Gaza Marine field, approximately 36km from the Gaza coast. The second well confirmed the presence of an important new gas discovery.

· 2001 A technical study recommended a sub-sea development with pipeline to processing facilities on the shore.

· 2002- 2004 BG Group sought private customers in the power generation and industrial sectors in Israel.

· 2005 BG Group examined the potential to export gas from Gaza Marine to Egypt for liquefaction and onward export to LNG world markets.

· 2006 Negotiations with the government of Israel were re-opened after it stated its intent to busy Gaza Marine gas to fill the expected shortfall in supply after 2011.

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