British gas producer BG Group is making progress in talks about supplying Palestinian gas to Israel from off the Gaza coast but political tensions remain an obstacle to a potential deal, it said on Wednesday.

A deal would have a significant impact on the Palestinian government, which is in the middle of a cash crunch. It would result in $100 million a year in taxes, royalties and equity.

The British newspaper The Times reported that the group was poised to agree on the terms of a $4 billion deal to supply gas to Israel, with representatives from the British energy firm scheduled to meet Israeli negotiators next week.

	Advertisement

"At the moment we are making progress in the negotiations. but any potential deal will require bilateral engagement between the two governments [Israel and Palestinian Authority] to get the project across the line," a BG spokesman said.

"There are still commercial issues to be resolved in the negotiations but the fundamental point here is that bilateral engagement is absolutely essential to get any project across the line."

The spokesman declined to comment on the estimated value of the 15-20 year project.

Sources close to the negotiations have told Haaretz in the past that the terms of the deal would have to meet defense establishment criteria regarding money transfers to the Palestinian Authority.

At its Gaza Marine site that is in Palestinian hands, BG has found one trillion cubic feet of natural gas.

Israel has said it would like to buy 1.5 billion cubic meters a year of natural gas from BG, as the country aims to increase its natural gas consumption.