Lebanon: New Violence Threatens Natural Gas Developments

An explosion in the Lebanese capital of Beirut on 27 December 2013 has killed at least five people and wounded 50. The car bomb exploded in the city center of Beirut near major head offices, banks and commercial centers. More than 10 buildings were damaged. Former Lebanese Minister Mohammad Chatah was among those killed in the explosion. Chatah was an adviser to former anti-Syria coalition prime ministers Saad Hariri and Fuad Siniora and a member of the March 14 anti-Syria coalition which supports the Syrian opposition. Lebanon has witnessed several bombings over the last few months and it is no secret that the recent events are a result of the ongoing conflict next-door in Damascus.

Lebanon’s political vacuum has raised security concerns over the caretaker government’s ability to contain the country’s instability. Lebanon has been without a government since prime minister’s Mikati’s resignation in March 2013 and has not been able to form a new government that would cope with the rising tensions in Syria. Repeated calls for the formation of a new government that would restore confidence in its institutions have failed to achieve a result. Deep political divisions and monopolistic ambitions threaten a continued impasse. Needless to say that the explosion in the heart of Beirut will have severe negative repercussions on the economy, especially at this time of the year where Beirut usually sees a substantial inflow of tourists and Lebanese expats looking to spend the end of the year holidays in the capital.

Lebanon’s lack of government has caused several delays in the launching of the country’s first licensing round. Lebanon has attracted 52 major international oil and gas companies to its pre-qualification round earlier in 2013: 46 companies were successful, 12 as Right-Holder Operators and 34 as Non-Operators. Advanced seismic surveys suggest that Lebanon could be very rich in offshore hydrocarbons, its waters containing up to 96 Tcf of natural gas. Lebanon’s licensing round is now set to be opened on 10 January 2014. However, amid the recent security developments, further delays are to be feared. Two essential decrees, one delimitating offshore blocks and their coordinates and the second approving the model exploration and production agreement, still need to be issued. Lebanon’s instability and lack of political consensus risk deterring investors from participating in the country’s offshore explorations.

Neighbouring Israel and Cyprus have both commenced exploration activities in their respective exclusive economic zones. While Israel has made substantial gas discoveries (with its Tamar field containing around 10 Tcf of natural gas and with a 19 Tcf Leviathan gas field) and is currently planning its export strategy, Cyprus’ appraisal drilling of its Aphrodite field in Block 12 of its EEZ revealed modest but promising gas deposits of 3.6 to 6 Tcf of natural gas. The island is determined to build an LNG terminal on its Vasiliko coastal site between Limassol and Larnaca. Without a national plan aimed at creating an environment of collaboration, positivity and stability, Lebanon risks staying out of the energy game and forever drenched in its domestic rivalries.

Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.  Email Karen on ayat_karen@hotmail.com. Follow her on Twitter: @karenayat