Lebanon's Bidding Round Now Set to Open on August 14
Lebanon postpones the opening of its bidding round for the fourth time to August 14. The country has been delayed by domestic political problems. Only in March of this year did a new government win the vote of confidence breaking a ten months deadlock. Two pieces of legislation are yet to be issued for Lebanon to launch its licensing round. The two pending decrees are essential for Lebanon to commence offshore oil and gas explorations: one will delimitate the offshore blocks on offer and their coordinates and the other will approve the model exploration and production agreement.
Lebanon’s pre-qualification round launched in May 2013 received substantial amount of interest. Fifty-two companies submitted their application and forty-six were successful - some as operators and some others as non-operators - including oil and gas giants such as Statoil, ENI, Total, Shell, Chevron, Marathon, Petrobras, Maersk and ExxonMobil. However, the repeated delays in opening the bidding round could translate in some of the major companies losing their interest. Statoil and ENI have already expressed their decreasing appetite to participate in Lebanon’s hydrocarbon explorations.
Early estimates suggest that Lebanon’s waters are rich in hydrocarbon. Former minister of energy Gebran Bassil stated that as much as 95 Tcf of natural gas and 850 million barrels of oil could constitute Lebanon’s hydrocarbon wealth - according to surveys covering only 45% of Lebanese waters.
If Lebanon possesses enough oil and gas to satisfy its domestic demand, turn it into a net energy exporter and transform its suffering economy, and the attractiveness to attract some of the biggest players in the industry, it has not demonstrated to date its capability to bring the process to fruition. Domestic rivalries and inefficient procedures risk pushing away investors and leaving Lebanon out of the energy game.
Time is of essence when Lebanon’s neighbours are moving ahead with their explorations. The window of opportunity of entering the natural gas market might also be slowly closing given the unpredictability of future gas prices and the constant entry of new players.
Israel has taken a decision in principle to export some of its gas (approximately 40% of its current proven reserves) and has signed regional deals to sell the product. It has not yet decided on export routes to reach markets beyond its immediate vicinity. Cyprus has discovered modest amounts of natural gas in its Aphrodite field in Block 12 of its Exclusive Economic Zone and will be undertaking further activities in the hope to encounter sufficient amounts to commercially justify its onshore LNG terminal.
The Eastern Mediterranean could play a role in diversifying Europe’s energy supply. The quantities are not large enough to substitute Russian supply but could at least constitute a part of its energy portfolio. The recent events in Ukraine have reminded Europe of its need to diversify its sources of energy. Whether Lebanon will be part of the story will depend on its ability to kick start exploration activities and ensure their smooth and fast progress.
Karen Ayat is an analyst focused on energy geopolitics. Email Karen on ayat_karen@hotmail.com. Follow her on Twitter: @karenayat