Britain's energy company BG Group says closing down its Israel office

British energy company British Gas (BG) Group PLC said Tuesday it was closing down its Israel office and putting its operations off the Gaza coast on indefinite hold, after failing to make progress in talks to sell Palestinian gas to Israel.

BG has a license with the Palestinian Authority, valid until 2027, to develop the Gaza Marine field, which contains 1 trillion cubic feet (28.3 billion cubic meters) of natural gas. Lying about 36 kilometers off the Gaza shoreline the field is recognized as being in Palestinian territorial waters but for BG, locking in neighboring Israel as purchaser is crucial to making extraction of the gas viable.

The deal envisaged BG transporting gas from the Gaza Marine field through an undersea pipeline to the nearby port of Ashkelon.

From BG's British headquarters, a senior executive on the Gaza Marine project, Michael Baron, told The Associated Press by telephone that 18 months of negotiations with the Israelis had not produced sufficient movement toward a deal.

"We didn't believe there was any immediate prospect of any significant progress so it was time to draw a line under it, take time to rethink and consider our options," he said.

Baron said the group's office at Herzliya would close at the end of January with the loss of seven local staff positions and it was giving up its minority interest in a small field of the coast of southern Israel but would keep its Palestinian operations on hold, in the hope that prospects might improve in the future.

"We will be retaining our interest in the Gaza Marine license, we'll be maintaining our office in Ramallah and taking time to look at our options for Gaza Marine," he said.

The Gaza gas field represents the Palestinians' only significant natural resource and could be a much needed-revenue earner for the Palestinian Authority, which is dependent on foreign aid.

Like the United States and Europe, Baron said, BG does not do business with Hamas. Hamas, the violent Islamic movement, seized the Gaza Strip in 2006 from forces loyal to Palestinian Authority President Mahmoud Abbas.

"The license is awarded by the Palestinian Authority," Baron said. "So we deal only with the Palestinian Authority."