Amid today’s dismal Israeli-Palestinian context, positive developments have been in short supply. However, Prime Minister Benjamin Netanyahu’s June announcement of preliminary approval for the development of the Gaza Marine gas fields provided a rare glimpse of a potential win-win opportunity. For the Palestinians, it could provide a much-needed boost to their lagging economy and the cash-strapped Palestinian Authority (PA). On the Israeli side, it allows the Netanyahu government to claim it is assisting in improving living conditions in Gaza and could lead to less U.S. pressure on issues like settlement expansion. In the big picture, this is another example of how energy is increasingly becoming a focus for potential win-win agreements in the East Mediterranean.
If a final agreement is reached it means the development of fields estimated to contain over 1 trillion cubic feet of gas. As the ongoing violence — and most dramatically the events leading up to and including the Israeli incursion into Jenin — underscore, there are obvious limits to any gestures and confidence-building steps that are not linked to a political horizon and a genuine effort to achieve a final political settlement. However, positive steps should not be dismissed at a time when all roads to diplomacy appear blocked, and the need for improvements on the ground is high.
The Long Road to Today
It was 1999 when Israeli Prime Minister Ehud Barak first allowed exploration of the area, and the PA granted British Gas (BG) exploration rights. BG discovered the Marine 1 and Marine 2 gas fields about 22 miles off the coast of Gaza in 2000. The project has been on hold since then, yet another victim to the dynamics of the ongoing conflict and occupation. After Shell acquired BG in 2016, the Consolidated Contractors Company and the Palestinian Investment Fund acquired Shell's interest in the fields, with each party owning 50%.
Negotiations were revived several times over the years. However, the project came back to the forefront following the Russian war on Ukraine and the ensuing global energy crisis. The recent effort is also inspired by the Israel-Lebanon maritime agreement and is encouraged by the establishment of the EastMed Gas Forum in which Egypt, Israel and Palestine are members, as well as the MOU to export natural gas from Israel to Europe via Egypt that was signed by Egypt, Israel and the European Union, who are still looking for alternatives to Russian gas.
The project was also discussed in meetings at Aqaba and Sharm El Sheikh this spring, which aimed at de-escalating the Israeli-Palestinian situation. It is in this context, that the United States and Egypt have in recent months leaned on Israel to greenlight the project.
The Egyptian Perspective
Egypt has security, diplomatic and economic interests in seeing this project come to fruition. With an interest in supporting the Palestinian people and economy, and leveraging its ability to engage all key actors, Egypt was able to broker a compromise that is acceptable to the PA, Hamas and Israel. While the revenue — which could reach an estimated $700-800 million a year — will go to the PA and an agreed portion will be used to support Gaza's economy, Egypt would also benefit. A portion of the gas will be liquefied in Egypt for export to Europe, and the state-owned Egyptian Natural Gas Holding Company is expected to take part in developing the field.
Egypt also hopes that this project could be a step that advances Palestinian reconciliation and contributes to achieving a long-term calm in Gaza, linked to an ambitious economic plan and building on its own reconstruction efforts in Gaza that started after the May 2021 war. The plan is coordinated with the United States and Qatar and would eventually include the West Bank, to encourage maintaining broader calm and prepare the ground for a political process to emerge.
The Palestinian Perspective
The PA has been eager to advance this project for many years, with it first running aground when the second intifada hit in 2000, and Prime Minister Ariel Sharon was in no mood to do something that could benefit Palestinian President Yasser Arafat. The situation only became more complicated once Hamas took control over Gaza in 2007. In a sign of the ongoing rivalry, when the PA announced in October 2022 that a team would be formed to conclude an agreement with Egypt concerning Gaza Marine, Hamas accused the Authority of not being qualified to receive the gas file given its involvement “in cases of corruption, waste of money and misconduct." Nonetheless, with the United States, Egypt, Israel and the PA all united in their goal of ensuring no direct role for Hamas, Egypt’s achievement of an arrangement that all parties could accept won the day.
Israel deducts $22 million from the PA tax revenue every month (almost equally divided between electricity going to Gaza and the West Bank). One estimate is that the PA’s savings may reach $560 million annually by eliminating the need to import Israeli electricity. The PA burden will dramatically diminish if gas can be used to generate electricity there. Hamas may also see the indirect benefit to its standing with the Gazan people who currently have access to less than 40% of their energy needs, and for whom electricity is available for only a few hours daily. Converting electricity generation from diesel to natural gas would also reduce pollution in Gaza, ensure a more reliable energy supply, and have huge developmental implications dramatically improving living conditions.
The Israeli Perspective
The Israeli announcement reflects a significant policy change, particularly since Netanyahu opposed the similarly modeled Israel-Lebanon maritime agreement reached by the previous government. In this light, Netanyahu’s forward-leaning posture can be viewed as a gesture toward Washington and Cairo in an effort to mitigate the American reaction to his government's decisions on settlements expansion and the ongoing judicial reform, contribute to Egypt’s efforts for long-term calm in Gaza, and perhaps help advance negotiations on prisoner exchange with Hamas.
The development of the fields has been on hold all these years not simply due to security concerns given Hamas control of Gaza, but also due to Israelis’ and Palestinians’ inability to agree on the former’s insistence that it be granted surplus gas from the field — an initial pre-condition when the concession was awarded to BG in 1999. With the subsequent discovery of abundant Israeli gas fields, this condition has lost its relevance to Israel.
Several challenges remain. First, Israel is expected to demand guarantees that the gas revenues will not benefit Hamas. Precedent suggests this is surmountable, given the arrangements made regarding Qatari assistance to Gaza. A more difficult challenge lies in reports indicating that Israeli officials would postpone development of the fields until advancement is registered on Hamas returning two Israeli civilians and the bodies of two Israeli soldiers it has been holding since 2014. A third sensitive challenge is that one of the fields, albeit a smaller and less significant one, is divided territorially between Palestinians and Israelis with Israel maintaining that 70% of the gas lies on its side. This means that moving forward would require a recognition of maritime borders, which would be an unlikely step for the current Israeli government given its hardline stance toward concessions to the Palestinians.
The U.S. Perspective
The U.S. role in Gaza Marine has been low-key and less visible in comparison with its leading and indispensable role in mediating the Israel-Lebanon maritime agreement. However, its effort with Israel was and remains instrumental, particularly regarding the abovementioned challenges, and in encouraging a global company to invest in this venture. It was reported in 2018 that Energean, the company that is developing Israel’s offshore Karish and Tanin oil fields, was negotiating with the PA to develop the Gaza Marine. In light of the risks involved, bringing the initiative to fruition will require assurances that the United States can facilitate and may prove to be crucial to its success.
Through this project, alongside additional development efforts, the United States can also adhere to its declared objective of improving living conditions for Palestinians, at a time when its ambitions for addressing the conflict stop at such practical quality of life measures.
How Will a Gaza Marine Agreement Affect the Region?
Both the Israel-Lebanon and Gaza Marine agreements are complicated in their own ways, but both have the potential to be transformational. Gaza Marine could not have seen progress had it not been for the Israel-Lebanon agreement, which still has huge unfulfilled potential.
It cannot be ignored that this development is taking place at one of the most challenging political moments for the Israeli-Palestinian conflict, and on the Israeli, Palestinian, regional and international fronts. This also applies to the economic and humanitarian situation. The U.N. reported that the money is running out for its humanitarian program for refugees in Gaza, and it will be forced to freeze the program for some 200,000 people. If new funding is not provided immediately, the entire program could come to a halt in August 2023, a devastating step for another 350,000 people.
If the understanding between the PA and Hamas holds, it can be a stepping-stone toward their elusive reconciliation. Moreover, if Israel is more forthcoming with Palestinians including on the Gaza Marine, this can potentially advance regional cooperation, which may even include Turkey, on issues pertaining to gas, electricity generation, linking electricity grids and perhaps also desalination and environmental challenges. Countries in the region would be able to consider how their bilateral gas deals could benefit from other ongoing gas projects, particularly in terms of possible joint utilization of infrastructure for cross-border transactions.
Notably, the only official announcement regarding Gaza Marine was the one issued by Israel. This reflects the cautious approach of all the other parties, their recognition of the volatility of the situation, and the challenges that any constructive step will have to face. The question remains whether this effort will proceed and succeed, particularly in light of the extremist nature of the current Israeli coalition, and its uncompromising stance toward the Palestinians.
By itself, this Gaza Marine development is no cure for the ills of occupation and ongoing conflict — it is tantamount to providing aspirin to a cancer patient — but it has the potential to relieve some pain and generate opportunities for additional steps that can improve conditions for Palestinians. This could be a door opener that should not be dismissed in a context where so many other doors are closed.