By Dan Williams
JERUSALEM (Reuters) - Israel and the Palestinians are close to talks on developing a gas field off the Gaza Strip 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.
Diplomacy has been thrown into further disarray by upheaval in 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 ... 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 Gaza 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 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."
PALESTINIANS SEE WINDFALL
"Gaza Marine" was discovered a decade ago but discussions on production involving British and Lebanese partners fell through. The Palestine Investment Fund (PIF) said producing gas there would take three years and about $800 million in investments.
"Developing this field will tremendously reduce the expenses of power that we are consuming," PIF director Mohammad 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 40 percent of its natural gas from Egypt, in a deal built on their 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.
The "Quartet" represented by Blair -- the United States, European Union, United Nations and Russia -- will meet in Munich on Saturday. An EU diplomat said one of the other partners had proposed deferring the session in light of the regional uproar.
"Because of what is happening the Quartet needs to meet and the Quartet needs to give a strong signal that the peace process is alive," the diplomat said.
Netanyahu saw in the Cairo crisis a vindication of Israel's demand for permanent troop deployments in the West Bank's Jordan Valley and the demilitarisation of a future Palestinian state under a future accord. The Egyptian Sinai is demilitarised.
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.
(Additional reporting by Mohammed Assadi in Ramallah and David Brunnstrom in Brussels; Writing by Dan Williams)
