Gaza Gas July 4, 2006
Posted by CamdenKiwi in : Investing , trackbackOne of the companies in which I’m a shareholder, the gas explorer and exploiter BG Group, has recently been tied up in an interesting controversy with geo-political implications. Jointly with a company owned by Palestinian families, they have the rights to exploit a gas field off the coast of the Gaza Strip. Once up and running, this field could provide Palestine with much-needed revenue by about 2010.
The two natural customers for this gas are Egypt and Israel, and about a month ago BG Group broke off talks with Israel and it looked like a deal would be made with Egypt. However, after a visit by the Israeli PM to No 11 Downing St, BG Group are back talking to Israel again.
I have two concerns with this.
The first is that, as a shareholder, I’d like my company to act in my best interests, within constraints of good corporate behaviour and obedience to laws and regulations. I don’t think Gordon Brown needs to get involved with that, and it increases the risk in the shares if he does. It would be naive to assume that oil and gas deals don’t involve politicians, especially when the deal involves such a sensitive location, but if this sways BG Group from doing the best deal for the company, that is bad for shareholders.
The second is that I seriously question the ethics of exploiting a resource which is ultimately owned by a country who’s government is in no fit state to make good judgements about it and is in fact barely surviving. BG Group has rights to 90% of this field. How much are they paying for that right, and to whom? Will Palestine benefit by any more than the 10% owned by the other company in the joint venture, or is it in too much chaos to be able to even if the rights allocated would allow it to. For Palestine, it may be better to leave the gas in the ground until it is in a position to make good use of any revenue from it.
As an ethical shareholder, I have to ask myself if this is something with which I want to be involved. And as many, if not most, FTSE 250 companies will present issues of this magnitude if not necessarily exactly this type, what do I do?
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