The end of 2017 has brought significant updates to Lebanon’s Oil and Gas Sector same as it began, with the cabinet awarding Exploration and Production Licenses for two Offshore Blocks (Block 4 in the northern half of Lebanon’s maritime area, and Block 9 to the Southern borders with Israel) to a consortium made up of the French Giant TOTAL, the Italian Giant ENI, and Russia’s Novatek, and successfully fulfilling its roadmap approved in January 2017.
A huge Step Indeed, even if it came after around four years and a half of constant delays due to the country’s political deadlock since May 2013, a delay which ended by admitting the same Licensing concept proposed in that time. The only difference is that Lebanon will be surrounded by competitive producing markets in the Levant Basin, and will have to double its efforts in the race of becoming a regional O&G Hub. The winning Consortium is expected to start its activities beginning of 2019, with 2 to 3 exploratory wells in Block 4 and 2 wells in Block 9, all during the first 3-year exploration period.
The roadmap was launched in the Government’s first meetings of the year by approving two crucial Decrees (Decree 42 & 43) related to the Blocks Delineation and E&P Agreements, and was followed by a second Pre-qualification Round between February and April to attract new companies interested in Lebanon’s first Licensing Round, in parallel to a strong marketing plan led by the Ministry of Energy and Water along with the Lebanese Petroleum Administration both regionally and Internationally. In addition, the Lebanese Parliament has completed the legal O&G framework during summer by approving the Tax Law that defines the IOCs’ fiscal dues and rights. As a result of all the above, and taking into consideration the current market conditions & low Oil prices circumstances, the LPA has received 2 applications on 2 different blocks out of the 5 blocks open for Licensing, which were first negotiated between the MEW and the Consortium, before being approved in the Government meeting last Thursday, seeing their positive impact on the Local Economy.
An impact expected to create new job opportunities for graduates, experts & expats in this field, improve Lebanon’s position in the worldwide rankings as well as reviving the services sector, being an important factor in this new value chain of the country. Yet, the announcement has been accompanied by strong calls to keep this sector away from the Lebanese way of public sector’s and National wealth’s mis-management, and by abiding to transparency laws and regulations & good governance in addition to respecting the citizens’ rights in access to information of all kinds and in all sectors related to O&G, and this cannot be accomplished without a bigger role for active civil society groups highlighting on the most important issues to tackle, and taking among its responsibilities the awareness campaigns to citizens and stakeholders.
On another front,, several important draft laws not directly related to this first Licensing round are yet to be discussed and approved by the Government & the Parliament during the upcoming year, in order to prepare the basis for any upcoming O&G production: the Sovereign wealth Fund law, the Onshore law, the National Oil Company law and the Petroleum Assets Directorate at the MoF.
The Levant Basin, an active O&G Hub
Lebanon’s step to move forward in the exploration phase was aligned during 2017 with several regional O&G activities which allow us to conclude that the East-Med region will host a race among countries to become the Energy Hub of the region, and get the privilege of establishing an LNG terminal sufficient to treat the Levant Basin’s expected Production.
Few days before Lebanon’s awarding, Israel’s Energy Ministry gave preliminary approval to bids from Greek and Indian energy companies to explore for oil and gas in their maritime waters. Energean was granted licenses to explore five offshore blocks (Blocks 12, 21, 22, 23 & 31 next to Karish & Tanin), while the Indian group formed by ONGC Videsh, Bharat PetroResources, Indian Oil Corp and Oil India received the license for Block 32. On the Other Hand, and in the Neighboring Egypt, Pilot production at Eni SpA-operated Zohr natural gas field will begin in few days, as the country nears its goal of commercial output from the biggest gas discovery in the Mediterranean Sea by beginning of 2018. As for Cyprus, and after the success of its 3rd Licensing round and the awarding of 3 new blocks (6, 8 and 10), Eni is going to drill 2 exploratory wells in the next couple of months, one in Block 6 and one in Block 3.
With this said, will the Levant Basin become the highlight of the upcoming Decade?
MSc. Chemical Engineer, Petroleum Focus - University of Balamand