The East Mediterranean’s gas resources can promote cooperation, resolve conflicts and turn the region into an energy hub presenting new prospects for Lebanon and Syria.
Lebanon is currently in need to diversify its energy mix away from oil in order to strengthen its security of supply but lags behind neighboring Israel and Cyprus in developing its gas reserves in the East Mediterranean. 3D seismic surveys carried out by the Norwegian Spectrum company have estimated recoverable Lebanese offshore gas reserves at 25.4 trillion cubic feet. The development of Lebanon’s hydrocarbon resources nevertheless faces significant challenges at political and economic levels, namely the skyrocketing public debt, an unstable regulatory framework, and a weak administration attributable to the sectarian nature of the country’s political system.
The January 4th 2017 approval by the Lebanese cabinet of two decrees is considered critical to ignite the engines of gas exploration and production given that they provide the delineation of the offshore area into 10 blocks; the establishment of production-sharing contracts; the specification of tender protocols; and, the model exploration and production agreement (EPA) so that the first licensing round for offshore gas exploration becomes feasible and Lebanon catches up energy synergies in the East Mediterranean.
The commercial attractiveness of Lebanon’s gas resources is evidenced in the registration of interest by twelve operators and major oil companies such as Chevron, ExxonMobil, Shell, and Total in the prequalification round of 2013. But two main prerequisites are critical for the transformation of the Arab country into a gas producer. First, the Lebanese government needs to be held accountable and push for effective public consultation in that the bidding process is transparent and that contracts are sufficiently completed. Second, anti-corruption safeguards for the gas industry in Lebanon are necessary to be created to standardize binding rules for licenses and contracts with: (a) penalties on companies which provenly secure contracts through bribery; and, (b) the ability of companies to exercise supervision over one another for competitive reasons. Anti-corruption mechanisms can also include the creation of sovereign funds that take part of the gas profits and allocate them to the development of infrastructure projects and to the decrease of national public debt thus favoring economic growth.
On a broader regional setting, existing overlapping maritime claims between Lebanon and Israel over an 854 square kilometers area are hampering trans-boundary gas sharing initiatives on exploration and production. American mediation efforts thus far have failed to resolve the maritime dispute but reduced the risk of escalation by succeeding in dispiriting Lebanon and Israel from exploring gas fields and awarding contracts. The delineation of the maritime border is notably crucial for gas exploration given that oil and gas companies assess security and political risks before investing.
Also interestingly, delays in the Lebanese decision making process can close market-transformative opportunities, hinder joint monetization with Egypt and possibly Cyprus, and accelerate competition with new entrants in the regional gas market, such as Iran and Australia. For the conclusion of long-term gas supply contracts, the discovery of sufficient gas quantities in the ten blocks of the Lebanese maritime area is important. This is especially crucial when taking into account that by the time Lebanon comes on stream, a major gas market share will be locked up, thus limiting the Arab country’s ability to create gas price competition. No doubt that in the existence of a compact regulatory framework and a strong political leadership, regional energy arrangements will not likely bypass Lebanon.
Coming to neighboring war-torn Syria, the country can prove to be a significant regional energy player. Damascus overall undiscovered gas potential looks promising in accordance with French CGGVeritas’ acquisition of 2D seismic data on offshore Syrian resources in 2005 and subsequent 2011 evaluation that three offshore blocks in the Mediterranean Sea by the Syrian coast are expected to hold multi trillion cubic feet of gas.
Among various interests, geopolitics of energy seem to dominate the crisis in Syria. Foreign powers battle control of natural gas resources and the trade routes that bring energy to consumers. Conflicting energy interests in Syria are demonstrated by Russia, Qatar and Iran. Russia seeks to maintain investments in the energy sector in so-called “Safe Syria,” which is a promising zone of natural gas reserves in the territorial waters off Syria’s Mediterranean coast. The significance that Russia attributes to joining the East Mediterranean energy game is underlined by the fact that energy giant Gazprom has reportedly taken over the gas exploration and drilling rights off the Syrian coast from Russian state-controlled Soyuzneftegaz, which in 2014 signed a 25-year agreement with the Syrian government that concedes exclusive exploration rights in Syria’s EEZ.
Qatar’s energy agenda in Syria contradicts Russian and Iranian interests as it includes a pipeline that would connect Qatar and Turkey through Syria, in order to join the Nabucco pipeline and ultimately reach Europe. For its part, Iran’s energy strategy centers on the Iran-Iraq-Syria Islamic pipeline project, originally signed in 2011. The project is intended to transport Iranian gas through the Gulf to Iraq, then to Syrian and Lebanese ports, with Europe as the final destination.
Noteworthy, Syria contains a number of gas fields that have been periodically seized by the Islamic State, principally in Palmyra, a city that serves as transit for pipelines carrying gas from fields in Hasakah and Deir Ezzor provinces in northeastern and eastern Syria respectively. The regime’s control of Shaer field, the largest field northwest of Palmyra that feeds the national grid, is considered significant because it impedes the Islamic State from amassing further disproportionate rewards compared to its limited investment of combat manpower.
The “pipelization” of Syria is a reported reality. Thus all efforts should direct to the resolution of the Syrian conflict as a prerequisite not only for the development of the country’s untapped offshore gas resources but most significant for attracting foreign investment.
No doubt that as the cases of Lebanon and Syria show, potent decision making, cooperation and conflict resolution are critical for the region’s gas potential to be unlocked in a way that promotes economic growth and sustainable development for the benefit of current and future generations.
SOURCE
