Thursday, January 22, 2009

This Week's Other Big News from the Mideast

From the Lex Column in yesterday's Financial Times ("Holy Hydrocarbons"):

An old joke in Israel says that Moses turned left when he should have turned right during his desert wanderings. After all, he had the rotten luck of finding almost the only country in the Middle East virtually bereft of oil and gas.

In a piece of news this weekend overshadowed by the ceasefire agreement in Gaza - but with perhaps equally important security implications - a major natural gas find was announced 90km off the coast of northern Israel. Nobel Energy of the US, which owns a 36 per cent interest, called it the biggest in the company's history, saying the lower bound of the reserve may be 3,000bn cubic feet.

As sweet as such a discovery is for a small country whose right to exist is denied by most of the leading owners of the global energy reserves, it is a bitter pill for the BG Group and the Palestinian Authority. BG owned a major stake in the field and, reportedly against the objections of its country manager, allowed its rights to lapse without compensation three years ago. Instead, it focused on its holdings in Egypt and off the shore of the Gaza Strip, where it invested amid optimism over the peace process.

Even after Hamas won an election in 2006 and took control of Gaza in 2007, BG's negotiations over selling gas from GAza to Israel, which seeks to plug a looming supply gap, continued. Hamas opposed the deal as an "act of theft", both because Israel was the buyer and because the proceeds would have gone to the Palestinian Authority. Negotiations broke down over price in late 2007.

Along with its disastrous December rocket barrage, this is another Palestinian own-goal. Noble's new discover could supply Israel for decades. BG, meanwhile, is left supplying gas-rich Egypt, a much less lucrative prospect. Perhaps Moses had a sense of direction after all.

This brings to mind the late Israeli foreign minister Abba Eban's quip1 that the Arabs of Palestine "never missed an opportunity to miss an opportunity".

The photo of the natural gas rig above is from Noble Energy's website.

1That line has been quoted frequently recently, including in this Economist leader from a couple of weeks ago, "The Hundred Years' War".

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