The controversial permits for further exploratory oil drilling in Israel that the Givot Olam Oil Exploration Limited Partnership is currently seeking may be another cause for headache for the State of Israel. The Israeli daily newspaper Yedioth Ahronoth's financial supplement Mammon has learned that the partnership intends to apply to the Palestinian Authority and ask for a permit for drilling on the Palestinian side of the oil field — that is, on the other side of the Green Line.

According to assessments by professionals, the oil field from which Givot Olam seeks to produce oil extends into the West Bank, with about two thirds of the field located across the Green Line. However, to evaluate the site's potential for producing oil, exploratory drilling in the area is required. In case Givot Olam fails to obtain (from either Israel or the Palestinians) the permit it seeks to drill there, the Israeli Ministry of Energy and Water Resources may limit the amount of oil that the company is allowed to extract from the field, due to concern that it might draw from untapped Palestinian reserves.

In the coming weeks, the Central District Planning Committee is to decide whether to grant Givot Olam the permit for additional drilling south of Beit Aryeh. The Israel Nature and Parks Authority and the Society for the Protection of Nature in Israel, as well as the Ministry of Environmental Protection, oppose the request out of concern for possible environmental damage to the area, which is an essential ecological corridor. One of the reasons for their objection is the fact that the area, which is supposed to allow the movement of animals from north to south, is located along the Green Line and is thus blocked by the separation barrier in a manner that has already significantly reduced its size.

However, unlike political boundaries, which are demarcated on the ground, reservoirs of oil and gas do not follow the boundaries drawn by man. The permits for exploratory drilling granted by the state apply to the area bounded on the east by the Green Line, but the subsurface geological area containing the reservoirs of oil and gas extends across the border into the other side. Unlike the Gaza Strip or Ramallah, the area under discussion is classified as Area B, with Palestinian civil control and Israeli security control — which may further escalate the dispute over the question of who owns the oil. Israel has adopted the principle according to which a reservoir that cuts across the border between states should be proportionately divided between the sides concerned.

An evaluation of the maximal field reserves (with probability of 10%) prepared for the partnership states that the oil field in question has a potential for producing some 50 million barrels of oil. Under the evaluation defined as best, the field's production potential is some 20 million barrels. According to the professionals, the oil field has no strategic value for Israel, as local consumption amounts to more than 80 million barrels of oil a year, although it may yield considerable revenues.

Drilling on the Palestinian side would enable Givot Olam to gain control over both parts of the field and draw oil in the future without any limit on the quantity of oil drawn. And if indeed commercial quantities of oil are found there, the revenues or royalties from the oil will be divided between the sides. If this is not the case, the Energy Ministry will most probably instruct the partnership to limit the amount of oil pumped from the field, the way it is done in Noa North. 

The commercial potential of the oil field under discussion will thus also be limited along with its profitability, which will put in question the commercial viability of the drilling, as well as the approval of further drillings.

Deliberations have been held recently in the Energy Ministry with the participation of Foreign Ministry officials and legal elements with the purpose of finding a way to handle the tangle. A decision to approve drillings in the territories by Israeli companies — drillings which are prohibited at present — is liable to provoke wide-ranging protest both locally in the form of demonstrations or even attempted terror attacks, and globally in the political and legal arenas. A decision to allow the Palestinians to drill in the area or, alternatively, a decision by the Palestinians to drill there on their own would meet with Israeli opposition and, likewise, give rise to political and legal conflict.

With reference to the report, it has been stated by the coordinator of government activities in the territories that "the enterprise under discussion is a private business enterprise and we thus have no interest in commenting on the issue." According to the Energy Ministry, "the issue is being dealt with in line with the applicable arrangements specified under the relevant agreements." Givot Olam declined to comment on the report.

Who owns the oil?

So far, Israel has not recognized the existence of a Palestinian state, but at the same time, it has not annexed the region of Judea and Samaria, so that the ownership status of the oil fields lying across the Green Line is unclear. The Paris agreements, which spell out the economic relations between Israel and all the territories, state that there shall be division of resources in cross-border enterprises. However, a recent ruling by the Israeli Supreme Court (sitting as the High Court of Justice) legalizes quarrying and mining activities by Israeli companies in the West Bank, stipulating that the output from the Israeli quarrying and mining activities may be transferred across the Green Line.

Are the Palestinians entitled to approve drilling in the territories under their control?

It seems that the Paris agreements allow for such a possibility. Under the agreements, the Palestinians have to report to Israel on any exploratory drilling activity they intend to carry out. Israel is entitled to limit such activity for security or other reasons.

Is Israel entitled to approve drilling across the Green Line?

The issue is expected to give rise to legal controversy. As exposed by Yedioth Aharonoth, the Israeli Minister of Energy and Water Resources has recently decided to grant permits for exploratory oil and gas drilling in the Golan Heights, where the Israeli law is in force. At the same time, no such permits have ever been granted for oil drilling across the Green Line.

What is the significance of the drilling under discussion?

Such drilling will make it possible to determine the full scope of oil reserves in the oil field which lie in part in Israel proper, and in part across the Green Line, under Palestinian civil control. Israel has adopted the practice according to which, in the case of a reservoir that cuts across the border between states, the resources it yields should be proportionately divided between the sides concerned. It is assessed that 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.

What is going to happen if the drilling is not performed?

In the absence of full and complete information on the division of resources, the Energy Ministry may limit the amount of oil pumped by Givot Olam in Israel. As a result, the commercial potential of the oil field under discussion will also be limited along with its profitability, and the commercial viability of the drilling may be then put in question.

Are the Palestinians under any obligation to grant Givot Olam the permit for the drilling?

The Palestinians have no known formulated policy with respect to the exploitation of natural resources and even if they decide to approve such drillings, they can grant the permit to whoever they wish.

What is the customary practice in the world?

According to the practice in Texas, the first to drill is entitled to take any resources found, even if he is drawing on untapped reserves lying beyond the boundaries of the area allocated to him. Israel has adopted another practice, according to which, in the case of a reservoir that extends beyond political borders or across the boundaries of licensed areas, the resources yielded should be proportionately divided between the sides concerned. This is the practice applied in the Aphrodite gas field that is located off the coast of Cyprus, as well as in the Noa North field, which extends, according to assessments, into the territorial waters along the Gaza Strip's coast. When data is available regarding the layout of a reservoir, an agreement is customarily reached whereby a single company performs the drilling in the entire area, while the costs and the resources yielded are proportionately divided between the parties that have rights in the reservoir.