Israel and the Palestinians are close to talks on developing a gas field off the Gaza coast and other initiatives for an independent infrastructure there, Israeli Prime Minister Benjamin Netanyahu said on Friday.
The announcement anticipated a meeting on Saturday of world powers trying to revive peace negotiations mired by long-running Israeli-Palestinian disputes about West Bank boundaries as well as the hostility of Gaza's rulers, the Islamist Hamas.
Middle East diplomacy has been thrown into further disarray by the weeks of political upheaval in neighboring Egypt -- the regional powerbroker -- and other Arab states.
Hosting peace envoy Tony Blair, Netanyahu said the "Gaza Marine" gas field should be tapped together with an Israeli field nearby. "This is something that the Palestinian Authority expressed interest in," Netanyahu told Blair during a media appearance in Jerusalem.
"I think we're going to begin discussions and negotiations to facilitate both, where the revenues from the Palestinian field go to the Palestinian Authority and the revenues from the Israeli field go to the Israeli government and I think this is good for stability, good for prosperity and good for peace."
He also outlined new electricity, water and sewage projects "intended to make Gaza independent of Israeli infrastructure."
Israel withdrew from the Gaza Strip in 2005 but still supplies much of the basic energy and other needs of its 1.5 million Palestinians while enforcing a blockade intended to restrict arch-adversary Hamas.
Blair said U.S.-backed Palestinian President Mahmoud Abbas, who shelved talks with Netanyahu in September and is also at loggerheads with rival Hamas, sought "approval in principle of the supply of Palestinian offshore gas to Gaza power plants and specific project approval to a new power station there".
"Clearly there are many items to be worked out but this is an important breakthrough for the Palestinian Authority, people in Gaza and the broader region," Blair said.
"Gaza Marine" was discovered a decade ago but discussions on production involving British and Lebanese partners fell through. The Abbas administration-linked Palestine Investment Fund (PIF) said it would take about three years and investment of about $800 million to start producing gas at the site.
"Developing this field will tremendously reduce the expenses of power that we are consuming," PIF director Mohammed Mustafa told Reuters. "This will also reduce the electricity bill in the West Bank, and we will export some through Egypt."
Hamas had no immediate comment. Mustafa predicted that the Islamists, who split with Abbas's once-dominant Fatah faction in a 2007 civil war, "will not object to (gas) developers working on the ground in Gaza. That is not an issue with Hamas."
Israel imports some 40 percent of its natural gas from Egypt, in a deal built on their landmark 1979 peace accord.
But Israelis have been jarred by the popular revolt against Egyptian President Hosni Mubarak and the prospect of an erosion of bilateral ties with the Arab world's most populous country.
Noting the regional uproar, Netanyahu reiterated his call for Abbas to enter direct talks. The "Quartet" represented by Blair -- the United States, European Union, United Nations and Russia -- will meet in Munich on Saturday to discuss progress.
Netanyahu saw a vindication of Israel's demand for permanent troop deployments in the West Bank's Jordan Valley and the demilitarization of a future Palestinian state under any peace accord.
"One of the things that I think people can appreciate today is (that) ... the peace agreement has to take into account not only the situation that is present today, but the situation that could unfold tomorrow," Netanyahu told Blair.
Abbas suspended negotiations after Israel refused to renew a freeze on Jewish settlements in the occupied West Bank, where, along with Gaza, Palestinians want statehood. But lower-level contacts on West Bank economic and security projects continue.