Lebanon hopes an offshore energy discovery would give a big boost to its economy in the coming years.
“Lebanon begins the countdown.” With this booming tweet, the minister Nada Boustani launched the exploration milestone.
The first shipment of equipment to be used for Lebanon’s first oil and gas drilling exploration in the Mediterranean Sea arrived at Beirut Port on September; The head of the Lebanese Petroleum Administration Walid Nasr informed that oil companies will need around 55 days to determine if there are hydrocarbons in Block 4.
The least known offshore oil and gas frontier in the East-Mediterranean, Lebanon is preparing itself for a possible entrance into the regional energy club.
On December, offshore drilling is expected to start, targeting some prolific basins. The country is in the eastern Mediterranean region where a number of subsea gas fields in Israeli, Cypriot and Egyptian waters have been discovered positively since 2009. Nada Boustani, Lebanon’s Minister of Energy and Water, also reiterated that the country’s second licensing round is receiving lots of interest. Lebanon estimates its natural gas reserves at 25 trillion cubic feet (tcf) based on seismic studies, but these have not been confirmed by drilling and may not amount to reserves that are commercially viable.
Lebanon has high chances of making an offshore energy discovery once drilling gets underway from November or December and its second licensing round is receiving lots of interest, the energy and water minister said last week.
The first round of Lebanon’s licensing process saw blocks 4 and 9 awarded to a consortium of companies: French Total, Italian Eni and Russian Novatek.
As mentioned, Block 4 is in the right track but the Block 9 is still in limbo when Lebanon has an unresolved maritime border dispute with Israel over a sea area of about 860 square kilometres (330 square miles) extending along the edge of three of Lebanon’s southern energy blocks.
Lebanon hopes to unleash offshore oil and gas production as it grapples with an economic crisis. Washington is mediating between the two countries, which have been officially at war since Israel’s creation in 1948.
At present, pushed by US president Trump’s Administration, unofficial discussions are ongoing between Lebanon and Israel about the demarcation of the maritime borders. Until now, the maritime border issue, as both countries are still officially at war, has been a major obstacle for international oil and gas companies to commit serious resources. Some of the blocks on offer by Beirut are in the disputed area or are already partly being explored by Israel.
The coming months will show the path that Lebanon will be able to take. The government has at last been able to set up Lebanon’s petroleum fiscal framework, focusing on offshore. The current fiscal regime is known, and expected to be relatively stable. Beirut also has stated that new regulations are planned in the coming years, mainly for onshore oil and gas and the setup of a sovereign wealth fund (SWF).
It became evident that the drilling operations expected to take place in December 2019 will be the game changer on the current fiscal situation and continuous deficit; Boustani’s tweets "big hopes for this industry" & that "The Lebanese will hopefully benefit from this sector soon" means that High Hopes are put on the Oil and Gas that will be discovered from the first drill. If so, all current scenarios will be reversed and the discoveries will be used to bypass the risk of fiscal downgrading expected in Early 2020, and to release the long-awaited CEDRE loans to revive the economy.