Energy & Mining

New Kid on the Block

Exploration

There are several reasons for cautious optimism in Lebanon’s energy sector, recently boosted by the awarding of two offshore blocks to an international consortium for exploration and development. The PPP […]

There are several reasons for cautious optimism in Lebanon’s energy sector, recently boosted by the awarding of two offshore blocks to an international consortium for exploration and development. The PPP framework that facilitated this process is expected to be repeated for the tendering of several other blocks.

At the end of 2017, the Lebanese Petroleum Administration (LPA) approved two licenses—blocks four and nine off the Lebanese coast—for an international consortium’s exploration efforts. The consortium includes France’s Total, Italy’s ENI International, and Russia’s Novatek; Total and ENI each have 40% stake in the consortium, while Novatek makes up the remaining 20%. Following the awarding, LPA outlined the next steps for the consortium and an estimated timeline. These include an exploration and production agreement (EPA) with Lebanon’s Ministry Energy and Water (MEW), and logistics and feasibility studies throughout 2018. Drilling activity is expected to start in 2019. Lebanese authorities have given the go-ahead for exploration in late May 2018.

As part of the agreements, the Lebanese government has a 65-71% share in block four and a 55-63% share in block nine. Additionally, company profits will be taxed 20%. With blocks four and nine off to a good start, Lebanon’s Council of Ministers approved, on May 17, 2018, a second licensing round at the recommendation of LPA. Now, LPA is preparing to launch this subsequent round of bidding at the end of the year.

According to a 2010 US Geological Survey (USGS) of the Levantine basin, which is considered a new frontier hydrocarbon province, an 83,000-sqkm area covering the territorial waters of Lebanon, Israel, Cyprus, and Syria holds some 1.7 billion barrels of recoverable oil and 1.22 trillion cubic feet (cbft) of recoverable gas. Various studies place Lebanon’s share of the hydrocarbons at roughly 850 million barrels of oil and 2.7 billion cbft of gas.

Original timelines for exploration were laid out before the oil price crash of 2014. However, domestic political turbulence, unfavorable oil prices, and maritime border disputes delayed exploration progress until 2017. Still, some of block nine lies in territory disputed by Israel and Lebanon. The disputed waters also include two other blocks. Though, currently, block nine is the only partially disputed block that has been awarded as part of an exploration and production licensing round. The Total-ENI-Novatek consortium has asserted that exploration plans do not include the disputed areas of the block, and the head of Total’s MENA exploration division sees no reason to delay exploration, even with the ongoing disputes. Slowly but surely, however, mediation is making progress. As of June 2018, behind-the-scenes mediation, facilitated by the US, was presenting new possible solutions to the ongoing eastern Mediterranean basin disputes. Israel is expected to begin its own licensing rounds later in 2018 as well.

While Israel’s exploration efforts are likely to result in increased export capacity, Lebanon is looking for hydrocarbons to fuel its domestic energy demands. Some estimate that Lebanon’s energy demand-supply gap is 1GW in a country of 4 million people. The country is exploring renewable solutions as well, but domestic hydrocarbon production would be a game-changer for the energy sector and broader economy.

Successful exploration efforts could mean mixed things for Lebanon. Some. including oil and gas company Petroleb’s CEO Salah Khayat, are optimistic that positive results from exploration activity will attract more companies and investors to Lebanon’s young upstream sector. Others are worried that valuable reserves, if discovered and recoverable, could undo any diplomatic progress with Israel thus far. And while Khayat believes a successful international consortium is ultimately good for Lebanon and Petroleb, he would also like to see more support from MEW and LPA for encouraging local involvement in the energy sector.

You may also be interested in...

Economy

Cost of Change

Lebanon's Protests and the Economy

View More
Beautiful,Woman,Standing,Outdoor,Wearing,Professional,Business,Formal,Fashion.,Arab

Telecoms & IT

What to Wear?

Lebanese fashion

View More
Lebanese,Village,Villa,With,Brick,Roof

Real Estate & Construction

More to Offer

Real estate growth

View More
42f35a4a-50d0-412f-9e08-be971a557ae4

Health & Education

Modern Thinking

Technology in schools

View More
f7e0467e-48de-4d86-91f4-e9c3f1a897f6

Transport

Open the Gateway

Port of Tripoli

View More
Tech Hub

Telecoms & IT

Tech Hub

The tech start-up scene

View More
Mom & POP

Industry

Mom & POP

Family businesses

View More
Stairway to prosperity

Finance

Stairway to prosperity

Youth and finance

View More
Not Easy Being Green

Green Economy

Not Easy Being Green

FOCUS Electricity sector reform plan

View More
I Have a Plan

Economy

I Have a Plan

Lebanon’s economic vision

View More
View All Articles