Israel sees Palestinian gas fueling Gaza power station

The Palestinian Authority owns the Gaza power station, while IEC provides half of Hamas-ruled Gaza's electricity.

Sources inform ''Globes'' that natural gas from the Gaza Marine field is intended for the residents of the Gaza Strip, and Israel will not buy it. The idea is for the gas to power the power station in Gaza, which currently uses diesel to supply electricity to the Gaza Strip's residents.

Israel is also considering delivering gas from Gaza Marine via the Yam Tethys rig by pipeline to Ashkelon and then to Gaza. Security considerations partly underlie the Israeli proposals; Israel is concerned that Hamas could use the diesel for the power station.

The Palestinian Authority would be the main beneficiary of a switch to natural gas, as it would save an estimated $100 million a year.

On Sunday, "Globes" disclosed that Prime Minister Benjamin Netanyahu has proposed to Palestinian Authority President Mahmoud Abbas (Abu-Mazen) to jointly develop the Gaza Marine and Noa offshore natural gas fields. The Noa field, which has 7-8 billion cubic meters of gas could replace Egyptian gas, if its supply is not resumed, while the 30-billion cubic meter Gaza Marine field could meet the electicity needs of Gaza's 1.5 million residents.

Israel Electric Corporation (IEC) (TASE: ELEC.B22) currently supplies 44% of Gaza's electricity, and 50% is supplied by the 140-megawatt local power station. Egypt supplies the rest.

Enron built the power plant, which is now owned by Consolidated Contractors Company (CCC), owned by Lebanon’s Khoury family, and the Palestine Investment Fund and Padico Ltd. The power plant is only partly operating using diesel that the Palestinian Authority buys from Paz Oil Company Ltd's (TASE:PZOL) Paz Ashdod Refinery.

Conversion of the Gaza power plant to natural gas would require construction of a pipeline, which would take three years.

Although Hamas rules the Gaza Strip, it is not officially involved in the production of electricity or its supply to the population. Until a year ago, the EU paid for the diesel bought from Paz, but the Palestinian Authority now bears the full cost.

The Palestinian Authority has not been able to collect debts the electricity it supplies to Gaza's residents from the power station, which means that the cost of fuel to operate it causes financial losses. For their part, Gaza residents suffer from prolonged outages because the plant is only partly operational.

The Gaza power plant is the only plant owned by the Palestinian Authority. However, Palestinian entrepreneurs want to build a 600-megawatt plant near Jenin, in the northern West Bank. IEC currently supplies all of the West Bank's electricity, and the Palestinian Authority is IEC's largest customer, responsible for 7% of total sale, amounting to over NIS 1 billion a year. Construction of the Jenin power plant would save IEC the need to build a new NIS 1 billion power plant of its own.

Published by Globes [online], Israel business news - www.globes-online.com - on March 8, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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