PALESTINE: The US-backed Palestinian administration is negotiating with Israel for permission to develop natural gas off the Gaza Strip coast.

Mediterranean gas could be a windfall for the Palestinian Authority (PA), which operates under Israeli occupation in the West Bank and has sunk into cash crises amid shortfalls in international aid.

As envisaged in the exploratory gas talks initiated by peace envoy Tony Blair, the PA would alone levy tariffs on revenues from private pumping in Gazan waters, though breakaway Hamas govern the coastal enclave.

Israel, which keeps Gaza under a maritime blockade, said it had held "initial negotiations" with the PA about the gas.

The Israeli Foreign Ministry said in a report to world powers coordinating economic aid for the Palestinians: "Development of the Gaza Marine gas field will generate revenues that could contribute dramatically to Palestinian fiscal sustainability."

PA officials could not be reached for comment but Mr Blair's spokeswoman said: "The (gas) field itself will take around three or four years to develop."

Private partners, Consolidated Contractors Company (CCC) and BG Group, would develop the gas field "and hand over the royalties and the taxes to the PA".

Hamas spokesman Sami Abu Zuhri said: "We do not recognise any agreement reached by the Palestinian Authority regarding the gas fields off Gaza's shores, and the government in Gaza should be consulted over any agreement of this kind."