Too hot to handle? Shell’s Gaza gas field sale hits problems

Shell's logo can be seen in this file photo. (Reuters)
Updated 11 January 2018
0

Too hot to handle? Shell’s Gaza gas field sale hits problems

LONDON: It may prove to be Royal Dutch Shell’s hardest sell. The Anglo-Dutch group is struggling to find a buyer for its gas field off the Gaza Strip, even among energy companies long used to dealing with projects fraught with political and security risks.
At least one European company has shown interest in the undeveloped Gaza Marine field following a reconciliation deal in October between the two rival Palestinian factions, a source involved in the talks said.
But the firm’s discussions over the field, located about 30 km (20 miles) off the Gaza coast, have ground to a halt since tensions in the wider region have taken a fresh turn for the worse, the source told Reuters.
“Until the political situation is resolved I really can’t see anything happening here,” he said.
Gaza Marine has long been seen as a golden opportunity for the cash-strapped Palestinian Authority to join the Mediterranean gas bonanza, providing a major source of income to reduce its reliance on foreign aid.
Shell became the field’s main shareholder and operator when it acquired BG Group in 2016 for $54 billion. Since announcing the BG purchase the previous year, Shell has sold around $25 billion in assets to reduce its debt, and hopes to reach $30 billion by the year-end.
According to two industry sources, Shell is currently in talks with the Palestinian Investment Fund (PIF) to find a buyer for the energy giant’s 55 percent stake in Gaza Marine.
Both Shell and PIF, which is running the sale process and itself holds a minority stake, declined to comment.
Plans to develop the field — estimated to hold over 1 trillion cubic feet (tcf) of natural gas, the equivalent of Spain’s consumption in 2016 — were put off several times over the past decade. The delays were due to internal Palestinian rivalry and conflict with Israel, as well as economic reasons, industry sources and former BG employees told Reuters.
Then the mainstream Fatah party of Palestinian President Mahmoud Abbas signed the reconciliation deal with Hamas, an Islamist movement which seized control in Gaza a decade earlier.
This allowed the internationally-recognized Palestinian government to take office in Gaza, and PIF chairman Mohammad Mustafa said after the deal that efforts were underway to revive the Gaza Marine project as soon as possible.
TRUMP
However, a flaring of violence on the occupied West Bank since US President Donald Trump recognized Jerusalem as Israel’s capital last month has highlighted the risks involving the project, the source involved in the talks said.
Gaza Marine, discovered at the end of the last century, lies between two rapidly expanding gas hubs in Egypt and Israel, both of which have attracted huge investments in recent years.
The development of Gaza Marine, though relatively small compared with the giant Eni-operated Zohr field in Egypt or Noble Energy’s Leviathan field in Israel, is estimated to cost around $1 billion.
Gas from the field would run power stations in Gaza and the West Bank town of Jenin, and could even be delivered to neighboring Jordan. “It is a field with a lot of potential if we could unlock its value,” one source said.
Attempts to develop the field were put on hold repeatedly after Hamas, which Western countries and Israel have designated as a terrorist group, took control over the Gaza Strip in 2007.
Israel then put an economic blockade on Gaza, raising questions about the financing of the project and the sharing of future profits among the Palestinians. This made any progress with the development impossible, according to a former senior BG employee.
Israel has, however, said in the past it supports the field’s development.
“Gaza Marine has not only an economic dimension, it also has a strategic dimension and diplomatic considerations,” Maj. Gen. Yoav Mordechai, the top Israeli army liaison officer with the Palestinians, told Reuters.
“But its operation is a question of the geopolitical situation. Certainly not with Hamas there. Certainly not in the absence of diplomatic arrangements. Because it is a dramatic energy source,” Mordechai said.
Shell is unlikely to go ahead with the development of the field in the foreseeable future, according to several sources. The company is also weighing the future of its large gas facilities in neighboring Egypt, which it likewise acquired from BG.


Italy endorses China’s Belt and Road plan in first for a G7 nation

Updated 24 March 2019
0

Italy endorses China’s Belt and Road plan in first for a G7 nation

ROME: Italy endorsed China’s ambitious “Belt and Road” infrastructure plan on Saturday, becoming the first major Western power to back the initiative to help revive the struggling Italian economy.
Saturday’s signing ceremony was the highlight of a three-day trip to Italy by Chinese President Xi Jinping, with the two nations boosting their ties at a time when the United States is locked in a trade war with China.
The rapprochement has angered Washington and alarmed some European Union allies, who fear it could see Beijing gain access to sensitive technologies and critical transport hubs.
Deputy Prime Minister Luigi Di Maio played down such concerns, telling reporters that although Rome remained fully committed to its Western partners, it had to put Italy first when it came to commercial ties.
“This is a very important day for us, a day when Made-in-Italy has won, Italy has won and Italian companies have won,” said Di Maio, who signed the memorandum of understanding on behalf of the Italian government in a Renaissance villa.
Taking advantage of Xi’s visit, Italian firms inked deals with Chinese counterparts worth an initial 2.5 billion euros ($2.8 billion). Di Maio said these contracts had a potential, future value of 20 billion euros.
The Belt and Road Initiative (BRI) lies at the heart of China’s foreign policy strategy and was incorporated into the ruling Communist Party constitution in 2017, reflecting Xi’s desire for his country to take a global leadership role.
The United States worries that it is designed to strengthen China’s military influence and could be used to spread technologies capable of spying on Western interests.
WARM WELCOME
Italy’s populist government, anxious to lift the economy out of its third recession in a decade, dismissed calls from Washington to shun the BRI and gave Xi the sort of red-carpet welcome normally reserved for its closest allies.
Some EU leaders also cautioned Italy this week against rushing into the arms of China, with French President Emmanuel Macron saying on Friday that relations with Beijing must not be based primarily on trade.
There was not even universal backing for the BRI agreement within Italy’s ruling coalition, with Deputy Prime Minister Matteo Salvini, who heads the far-right League, warning against the risk of China “colonialising” Italian markets.
Salvini did not meet Xi and declined to attend a state dinner held in honor of the visiting leader on Friday.
Di Maio, who leads the 5-Star Movement, says Italy is merely playing catch up, pointing to the fact that it exports significantly less to China than either Germany or France.
Italy registered a trade deficit with China of 17.6 billion euros last year and Di Maio said the aim was to eliminate the deficit as soon as possible.
After talks with Italian Prime Minister Giuseppe Conte and Di Maio in the morning, Xi flew to the Sicilian city Palermo for a private visit on Saturday afternoon.
He is due to head to Monte Carlo on Sunday before finishing his brief tour of Europe in France, where he is due to hold talks with Macron and German Chancellor Angela Merkel.