Tuesday, March 28, 2017

Israel and Lebanon clash over maritime border amid oil interest - FINANCIAL TIMES

28 March 2017
John Reed in Jerusalem and Erika Solomon in Beirut

Row over wedge of Mediterranean Sea casts shadow over oil and gas tenders

An Israeli attempt to establish sovereignty over a disputed area of the Mediterranean has angered Lebanon and put the two countries at odds when both are trying to attract foreign investors in oil and gas.

The disagreement over the maritime border comes at a time of rising tensions between Israel and Hizbollah, the Lebanese militant group, and serves as a reminder of regional geopolitical risk as both Israel and Lebanon — two enemy states — want to secure multibillion-dollar energy investments.

The dispute stretches back years, but has burst into the open in recent days after it was revealed that the Israeli government plans to propose a “maritime areas law” that would seek to establish Israel’s sovereignty over the disputed area that both countries claim as part of their territorial waters.

Israeli officials say they aim to resolve it through dialogue and mediation, but also need to assert their rights after Lebanon’s decision to include the disputed territory in last year’s prequalification round for energy investors. The southern areas in dispute with Israel are seen as having the best prospects for oil and gas exploration.

“The Lebanese government proposed some licences that include also the disputed territory,” Yuval Steinitz, Israel’s energy minister, told the Financial Times. “Before, it was the status quo that nobody does anything in the disputed area.”

Mr Steinitz sought to play down the conflict, describing it as “minor” and noting that the average width of the territory under discussion was just 7km. “I am quite confident that in the next year or two it will be resolved through some kind of dialogue or mediation,” Mr Steinitz said.

However, Nabih Berri, the speaker of the Lebanese parliament, has described the maritime territory as “the Shebaa Farms of the sea”, referring to a patch of disputed land between the two countries where Israeli troops and Hizbollah fighters have clashed.

“If [Israel] continues with its expansionist plot through the government and the Knesset, that means that the spark of war is looming on the horizon,” Mr Berri told Lebanese journalists last week. ”We, on our side in Lebanon, we will not be quiet and we will not accept any compromise on our people’s rights to these resources, which have a degree of holiness to us.”

Israel says the purpose of the maritime areas bill under discussion is to “clearly identify the different maritime areas and the Israeli laws which apply there, in accordance with international law”. Israel did not include the disputed area in an ongoing bidding process for oil and gas exploration that it launched last year.

The US has tried to broker a resolution between the two countries, which have no diplomatic relations and do not communicate directly. “The US has been trying to intervene for several years, but to no result,” said Mohammad Qabbani, a Lebanese MP. “We want the UN to come in and sort it; we want a Blue Line in the sea just like we have a Blue Line on land,” he says, referring to the border demarcation between the two countries.

Lebanon has struggled to attract interest in its own prequalification bidding round for oil and gas exploration.

After several energy companies pulled out, Lebanese officials recently reopened prequalification, which will now close at the end of March. Political infighting in the Arab state has also added to investor concerns.

One businessman at a regional firm said he believed the dispute was deterring potential investors in regards to Lebanon’s bidding round. “It’s pretty serious, and it’s one of the reasons we’re not entering the bids,” one energy executive said. “There’s already enough risk in offshore drilling — to get involved in disputed territories between two countries at war?”

Investors in Israel have also voiced concern about regulatory risk after tax rates changed.

In February the Israeli energy ministry extended the application deadline for offshore blocks by two months, causing some in Israel to speculate that interest in the tender fell short of expectations. Mr Steinitz said that “several” companies had expressed interest, and the deadline had been extended to give other potential bidders more time.