Lebanon granted its first offshore energy rights to a group comprising Total SA, Eni SpA and Novatek PJSC, joining a regional race to find and develop oil and natural gas wealth in the eastern Mediterranean after years of delay.
The cabinet awarded two licenses in its first offshore bidding round, allowing the companies to jointly explore blocks 4 and 9, Wissam Chbat, a member of the Lebanese Petroleum Administration, said Thursday by phone. The group has one month to prepare legal, administrative and technical paperwork before signing production-sharing contracts with the government in January, Chbat said. Drilling is expected to begin in 2019, he said.
France’s Total, Italy’s Eni and Russia’s Novatek filed their bids to explore the two blocks in October -- the only proposals the government received. The licensing round has encountered setbacks since 2013 amid political disputes over block delineation and government paralysis, leaving Lebanon trailing Cyprus, Egypt and Israel in exploring the eastern Mediterranean. This year, bidding was pushed back to give companies more time to understand a new tax law.
With a public debt amounting to around 150 percent of its GDP, according to the International Monetary Fund, and its economy weighed down by the cost of supporting 1.5 million refugees from Syria’s war, Lebanon is counting on revenue and taxes from discoveries to shore up its finances. That could help bolster fragile political breakthroughs this year in a nation regularly caught in the middle of regional conflict.
Block 9 is one of three that lie in an area contested by Israel. Lebanon is working with the U.S. on resolving the dispute, according to Prime Minister Saad Hariri. Large gas reserves have been discovered in the eastern Mediterranean in recent years, including the giant Zohr deposit in Egyptian waters and the Leviathan and Tamar fields off the Israeli coast.
Exploration work in both blocks will begin simultaneously and last five years, Energy Minister Cesar Abi Khalil said in a televised news conference Friday. The government will benefit from royalties, taxes and its share of production, which will range between 65 percent and 71 percent in block 4, and from 55 percent to 63 percent in block 9, he said.
Lebanon is “determined to explore all our maritime waters, it’s our right,” Abi Khalil said.
The first revenues are some way off, said Carole Nakhle, director of London-based Crystol Energy.
“Experience shows that gas discoveries, particularly offshore, take time to be brought on stream. In Lebanon, this is more so because of lack of infrastructure,” she said.
Seismic surveys show the country has at least 96 trillion cubic feet of gas and 850 million barrels of oil, Gebran Bassil, who was then the country’s energy minister, said in 2013.
The government is also studying a bill on onshore energy rights as parliamentarians try to draft a law governing Lebanon’s first sovereign wealth fund, which would soak up revenue from oil and gas.
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