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Crude disputes stain Palestinian oil tender

Palestinians want to start oil production but some worry Israel will stand in the way.

Last updated: 19 Mar 2014 15:21
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Palestinian Prime Minister Rami Hamdallah announced the oil exploration tenders on Tuesday [Reuters]

Ramallah, Occupied West Bank - The Palestinian Authority (PA) has issued a global tender for oil exploration in the West Bank, casting a spotlight on a crucial dimension to the Israeli-Palestinian conflict: the struggle over resources.

The announcement on Tuesday comes two weeks after Palestinian Prime Minister Rami Hamdallah [Ar] approved a cabinet decision to issue global tenders for exploration and excavation in an area of around 400sqr km across the West Bank. Almost all of this land is under full Israeli control.

Hamdallah's Deputy Prime Minister for Economic Affairs, Mohammad Mustafa, who is handling the tenders, said the project would be a joint venture, with the state-owned Palestine Investment Fund taking at least a 25 percent stake.

Between 30 and 186 million barrels of oil are expected to be excavated from the area, according to the PA. Lying west of Ramallah, the earmarked site is near an oil field run by an Israeli company on the Green Line, the 1949 armistice line, just outside the Palestinian village of Rantis.

But even though the fields are so close to the de-facto border between the West Bank and Israel, the PA has not said whether the move has been coordinated with Israeli authorities. David Baker, senior foreign press coordinator at the Israeli prime minister's office, said they did not have a comment on the matter.

Border disputes 

Israel's oil and gas exploration company, Givot Olam, currently operates the Meged 5 field, in the Israeli town of Rosh Haayin, a stone's throw away from Rantis. The company said it has already made $40m in oil sales since this field became operational three years ago. 

Before its discovery, the company hoped it would produce 2.3 million barrels over 20 years from other wells nearby. But in 2010, Givot Olam's then CEO, Tovia Luskin, said the area is sitting on a much larger reserve - 13.2 million barrels of recoverable oil - than originally anticipated. The entire site could contain 1.5 billion barrels, according to some estimates

The oil field is on both sides of the Green Line. 

Ephraim Sneh, former member of Israel's Knesset

The field sits by the Green Line, with access to it restricted because Israel says it is located within an Israeli army firing zone. Its proximity to the border raises the question of how far inside the West Bank the well extends - and how much of its reserves belong to the Palestinians. By one account: "The subsurface geological area containing the reservoirs of oil and gas extends across the Green Line, with about two-thirds of the area located in the West Bank."

Past terraced, cascading olive groves near the Palestinian village of Rantis, the Meged 5 oil rig hovers over workers in yellow hardhats.

Mu'ayad Odeh, who heads the Rantis village council, claims Israel has moved its separation wall several times to ensure full access to the field. "Everyone seems to know this big secret - that there's oil here," Odeh said. "But no one seems to be taking an interest to find out how much of it belongs to the Palestinians."

Israeli authorities have not acknowledged a Palestinian right to this resource. A spokeswoman for Israel's Ministry of National Infrastructure, Energy and Water Resources told Al Jazeera, via email: "The Rosh Haayin lease is located within the area of the state of Israel."

But former member of Israel's Knesset, Ephraim Sneh, said: "There's no doubt that [there's oil on the Palestinian side]. The oil field is on both sides of the Green Line. It is in the shape of a bean, and the Green Line crosses it almost in the middle." Sneh, who chairs the S Daniel Abraham Centre for Strategic Dialogue at Netanya College, said the resource provides an ideal opportunity for Israel and the PA to cooperate on a project that could be mutually beneficial.

Resource conflicts

The Oslo Accords, signed between Israel and the Palestinians in 1993, dictate that resources in shared territory should be made public and explored mutually. Abdullah Herzallah, a Palestinian Geographic Information Systems expert, says Israel doesn't want to "admit" that this is a natural resource which extends across both sides of the armistice line.

"The Israelis are trying to prevent the Palestinians from making use of their natural resources - in spite of the fact that Oslo agreement says that there should be a joint committee to discuss any natural resource extended on both sides," he said.

Herzallah suspects that the Israelis have already begun drilling into Palestinian territory. "They have already made horizontal excavations in the Meged-5 and Meged-6 wells... But they have a problem: They need to extend more and more inside the West Bank and to the east and this is the main reason why the Israelis are asking for land swaps in this area."

But Giora Eiland, Givot Olam's acting chief executive, said the company "absolutely" does not take any oil from the Palestinian side. "We only have vertical drills, and all of them are located on the Israeli side," he said.

In 2012, Israel's Supreme Court ruled that it was within the rights of Israeli private and public companies to exploit the West Bank's natural resources for economic gain. While Palestinian access to the Dead Sea is vastly restricted, Israel's Ahava cosmetics firm sells products made from mud of therapeutic quality from the area. Several Israeli companies also run quarries in the West Bank, where they extract materials for the construction industry. West Bank water resources are controlled by Israel, ensuring that usage by Israelis - including those living in settlements - is three times higher than by Palestinians in the West Bank.

'Robust economics'

UK-based petroleum geologist found that the development of the Meged Core Area has "robust economics... and could be a highly profitable venture if the predicted well production volumes prove to be achievable and sustainable".

While the discovery is not huge in comparison with the resources of oil-rich countries such as Qatar and Saudi Arabia, the well may be a game-changer for Palestinians. Today, Palestinian unemployment stands at 24 percent and the Palestinian Authority's 2014 budget is expected to run at a deficit of $1.3bn.

This is not just an economic problem, it's a political one, and the occupation is causing us delays in advancing our position

Ehab Bseiso, PA spokesman

But obstacles lie ahead for Palestinians - not just a lack of expertise in oil drilling but, more importantly, that Israel is unlikely to recognise Palestinian rights to any oil in the first place.

"This is not just an economic problem, it's a political one, and the occupation is causing us delays in advancing our position," explained Ehab Bseiso, the PA government spokesman. "The oil would help create not only sustainable development, but also less reliance on international aid and eventually [help] promote stability here."

In the past, Palestinian efforts to extract gas from Gaza's offshore field - estimated by British Gas at one billion cubic feet - have been derailed by politics. Gas was found off the enclave's coast as early as 1999, but exploration has been hindered by various obstacles, including Israel reducing the sea area of the Palestinian maritime jurisdiction from 20 nautical miles as directed under the Oslo accords, to six, and also Israel's full control of maritime routes.

Palestinians import all their energy from Israel. Just two months ago, the Palestine Power Generation Company became the Israeli Leviathan gas field's first client, signing an agreement to buy $1.2bn in gas over a 20-year period for an electric power plant near Jenin.

According to the World Bank, Israel's control of "Area C", which comprises 62 percent of the West Bank, is stunting Palestinian economic growth, especially since the area is "richly endowed with natural resources". The organisation said the Palestinian economy was losing some $3.4bn a year, a number equivalent to 23 percent of its 2011 GDP. The figure does not include income that could potentially be generated by oil revenues. 

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Al Jazeera
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