The issue over the sovereignty of Gaza’s gas fields is a very complicated issue. The Palestine owns the gas reserves from a legal standpoint.
Israel was able to gain de facto control over offshore gas reserves of Gaza with the death of Yasser Arafat, the Hamas election and the ruin of the Palestinian Authority.
British Gas Group and Tel Aviv government have been dealing on gas fields’ exploration and development rights, which bypassed the Hamas government.
The major turning point happened in 2001 election with the win of Ariel Sharon as the prime minister. The sovereignty of the Palestine over the offshore gas fields was disputed in the Supreme Court of Israel. Sharon argued that Gaza’s offshore gas reserves belong to Israel and Israel would never buy gas from Palestine.
The initial deal that would allow British Gas to supply Israel with natural gas from offshore wells of Gaza was vetoed by Ariel Sharon in 2003.
In 2006, the election triumph of Hamas resulted to the death of the Palestinian Authority. British Gas nearly signed a deal to source the gas to Egypt in the same year. However, British Prime Minister Tony Blair reportedly intervened on behalf of Israel. In May of the following year, Prime Minister Ehud Olmert’s proposal to buy gas from Palestinian Authority was approved by the Israeli Cabinet. It was a $4 billion contract with profits of the order of $2 billion in which half of it was to go to the Palestinians.
However, Tel Aviv had no plan on sharing revenues with Palestine. Israeli Cabinet setup an Israeli team of negotiators to thrash out deal with the BG Group, which bypassed both the Palestinian Authority and Hamas government. The goal was to nullify the contract between the BG Group and the Palestinian Authority signed in 1999 under Yasser Arafat.
In 2007, a proposal was formed with BG allowing Palestinian gas from offshore wells of Gaza to be transported by an undersea pipeline to the seaport of Ashkelon of Israel, thereby transferring control to Israel over the sale of the natural gas. However, the negotiations were suspended and the deal fell through.
BG Group withdrew from the negotiations in 2007 with Israel and closed their office in the country in January 2008.