 |
| East Med Foreign Ministers: Kasoulides, Bassil and Kotzias. |
With the election of a new president and the formation of a new government in the making, Lebanon is looking forward to a time when it might finally move ahead with its long-delayed plans to explore for hydrocarbons in the East Mediterranean. Yet with Lebanese politics being very complex, there’s no reason to expect that the offshore exploration game will come back into play quickly even though a number of politicians and businessmen are keen to get the suspended licensing round moving.
Saad Hariri, leader of the Sunni Muslim Future Movement, is trying to form a government before the country’s national day on November 22. If he meets that deadline it may suggest that there exists sufficient goodwill among Lebanon’s numerous political parties and religious sects to put the country on some sort of track.
Once the government is formed it will be expected to move quickly to pass two decrees that have prevented offshore exploration from moving forward. One decree provides government approval for the demarcation lines of the 10 offshore blocks as designated by the Lebanon Petroleum Authority; the other approves the model contract that will be used in future negotiations with operating companies and their partners who are awarded the offshore blocks.
“I foresee this government approving the two decrees and perhaps reopening the licensing round,” a source in the Lebanese oil business said. But, he added, it will be during the second half of 2017, after a new government is formed after parliamentary elections in May, before any licenses are awarded.
Lebanon’s current Foreign Minister Gibran Bassil, who is expected to be foreign minister in Hariri’s cabinet, and who was minister of energy when the licensing round was launched in 2013, said last week that approving the decrees will be a top priority for the new government.
“There is a general agreement in Lebanon concerning the need to demarcate the EEZ [exclusive economic zone], but let us be clear about the issue of gas and oil. This problem is not due to border conflict with any neighboring country,” Bassil said, in reference to an 854-square kilometer area disputed with Israel. “No one can stop us from exploring gas in our territorial waters. The delay on this issue is purely Lebanese and the new rule and government must give priority to the issue of gas exploration,” added Bassil, who also happens to be son-in-law of newly-elected President Michel Aoun.
Following the collapse of the Najib Mikati government in March 2013, Bassil, then energy minister, tried on numerous occasions to get the caretaker government to approve the decrees. When Mikati left office and Salam Tammam took over after a year without a government, Bassil, as foreign minister, continued to urge the Tammam government to pass the decrees until it became clear that it was unable to act. After delaying a closing date for the licensing round six times, the government in August 2014 said the closing date would be six months after the two decrees were passed, thus suspending the round indefinitely.
Bassil’s comments were made in Beirut on November 10 during a joint press conference with Cypriot Foreign Minister Ioannis Kasoulides and Greek Foreign Minister Nikolas Kotzias. The meeting suggests that there is a new trilateral group forming in the East Mediterranean. Over the last couple years, Cyprus has orchestrated meetings between itself and Greece and Egypt, and itself and Greece and Israel. The catalyst for these meetings, which have been at head of state level on several occasions, has been energy. With Lebanon coming back into play, Cyprus and Greece apparently believe it is time to arrange a Cyprus-Greece-Lebanon group whose emphasis will be on a shared energy future.
It is widely believed that there are large deposits of gas and oil in Lebanon’s offshore. As energy minister, Bassil contracted for 2D and 3D seismic surveys to be carried out over practically all of Lebanon’s East Mediterranean territory, and subsequently the survey companies would report that their data showed potentially large reservoirs of gas in most of the Lebanese EEZ and, in the northern areas, oil.
Armed with such seismic data, Lebanon launched in February 2013 a pre-qualification round that attracted ExxonMobil, Chevron, Shell, Statoil, Total, Eni and Anadarko and other major oil firms, and in April of that year the bidding segment was opened, but the fact that the two decrees were not approved by the government meant that no closing date could be set and therefore bids could not be placed.
Hariri’s government will last until parliamentary elections take place next May. After that a new government will have to be put in place. How smoothly putting another new government in place will depend on the success of this newly-formed government and the political conditions in the region at that time.
Currently the plan is to see the decrees passed, a new pre-qualification round carried through, and then bidding open for whatever number of blocks the government agrees to tender. (Lebanon has 10 offshore blocks.) Considering that it will take at least six months to evaluate the bids, it will indeed be late 2017 before any licenses are awarded.
Lebanon believes itself to be behind in the East Mediterranean energy challenge, but while discoveries have been made offshore Israel and Cyprus, both of those countries had hoped to get gas to the international market sooner. Israel’s Tamar field has been supplying the domestic market since March 2013, but decisions on the giant Leviathan field were delayed by two years after its status was entangled in regulatory issues. A final investment decision – based on a recently finalized deal to sell gas to Jordan – is due in the next couple months.
Cyprus is hoping to conclude a commercial agreement with Egypt by the end of the year for Aphrodite gas. More planning and a final investment decision will follow that. Leviathan and Aphrodite – both of which are operated by US independent Noble Energy – are unlikely to see gas begin to flow before 2020 or later. If it gets down to business, Lebanon could do some serious catch up by that time. Gary Lakes, Energy JournalistA version of this story has appeared in Middle East Oil and Gas Monitor.
SOURCE
