West Bank and Gaza – Energy Sector Review – World Bank report

WEST BANK AND GAZA

ENERGY SECTOR REVIEW

1. Executive Summary

1.1 Review Perspective

From the perspective of its energy sector, West Bank and Gaza is in an unusual position in at least three respects. Firstly, as a small energy market with no developed domestic resources of commercial energy, it is almost entirely dependent on imported energy supplies, specifically electricity and oil products. Because of political and logistical factors, nearly all of these supplies at present come from Israel.

A second unusual challenge faced by West Bank and Gaza is its fragmentation into two distinct geographical zones with divergent economic characteristics. The West Bank, where most Palestinian economic activity and a majority of the population are located, is landlocked and without its own primary energy resources, but it does border Jordan which is well situated to become a regional transit centre for energy. Gaza’s economy and population are smaller but still substantial, but it has a more favorable energy supply perspective: substantial gas resources lie offshore, it can receive supplies by sea, and it borders Egypt which is an energy-rich country that provides a potential low cost alternative to energy supplies from Israel.

A third unusual challenge is the constraints imposed by Israeli policies and actions on the ability of the Palestinian Authority (PA) to operate and develop its energy systems. These constraints arises from the following sources: (i) Israeli control over parts of the West Bank (“Areas C”) which can impose a serious challenge to constructing the power network c in these areas in the event that Israeli cooperation and coordination is not forthcoming; (ii) Israeli control of Palestinian territorial borders, particularly in the West Bank, which can effectively deny or limit trade across international borders, including importation of electricity and petroleum products through physical interconnections; and (iii) Israeli destruction of Palestinian power system facilities by military action, such as the June 2006 attack on the Gaza Power Plant that created a serious short-term crisis for power users in Gaza. These actions undermine Palestinian efforts to attract investment to its energy sector.

This Review addresses the question of how the energy sector can make an effective contribution to the economic recovery and long-term growth of West Bank and Gaza in this situation. It therefore deals with the medium and long term outlook and beyond the short term needs of the population under the ongoing economic disruption that started in early 2006. It does so by examining the broad regional and strategic dimensions relating to the sector that form the basis of a sustainable investment and institutional development programme.

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