More than 40 international oil companies are expected to bid in Lebanon's first gas tender in February 2013 after the government decided last week the process would begin in the next two months in order to tap as much as $700m in potential offshore gas deposits in the Mediterranean.
The country could start gas extraction as early as 2014 and begin pumping gas by 2017, David Rowlands, the CEO of British-based company Spectrum, which was conducted a 3-D seismic survey off the southern shore of Lebanon told the Beirut-based Daily Star.
Spectrum estimates Lebanon has about 25 trillion cubic feet (tcf) in the 3,000 kilometre square zone which puts the country's estimated findings ahead of Syria and Cyprus combined.
Any company that takes part in the process of offshore gas extraction is likely to invest between $300m to $1bn, the newspaper cited Roudi Baroudi, CEO of the World Energy Council, as saying.
In 2009, Israel discovered what is known as the Tamar field in the Mediterranean Sea, which has 10tcf of natural gas. Then, a year later, it discovered the Leviathan gas field, the largest discovery of its kind for a decade, but smaller than the world’s biggest gas field, which is shared by Qatar and Iran. Then, in 2011, two new offshore natural gas fields, Sarah and Mira, were also discovered, by an Israeli company.
Houston-based Noble Energy Inc, which is helping Israel with its oil and gas exploration, also made a major gas discovery last year offshore Cyprus known as Block 12, estimated to have 7tcf of gas.
In its first study in 2010 of the Levant Basin, the offshore Mediterranean region which stretches from the north of Egypt to the north of Lebanon and south of Cyprus, the US Geological Survey estimates the area has about 122 tcf of undiscovered, technically recoverable natural gas and holds 1.7bn barrels of undiscovered technically recoverable oil.
While Israel and Cyprus have moved forward, Lebanon lagged behind. Progress on any issue in the country hinges on political consensus among its various political factions and the tendering process related to offshore gas exploration has been held back by political bickering. Politics in the country has largely been defined by sectarian and regional lines which has been the norm since the end of a 15-year civil war in 1990.
Assuming that Lebanon's discoveries are sizeable, the money would help the country to retire gradually part of its public debt. It would also enable the country to slowly stop importing all of its energy needs, as it does now, and help reduce its import bill. That would then lower its trade deficit and in turn improve the balance of payments.
Lebanon's public debt, among the highest in the world, reached $55.5bn at the end of July this year, according to the Association of Banks in Lebanon. The country amassed the debt in the reconstruction phase following the end of civil war in 1990 and a month-long conflict with Israel in 2006.
The debt-to-GDP ratio has declined to 136.2 percent in 2011 from about 180 percent in 2006 and Prime Minister Najib Mikati, who says he wants reduce the ratio to 100 percent of GDP over the coming five years, has tabled the idea of establishing a sovereign wealth fund to invest any potential revenue from oil and gas production in the future.
The prospect of such a revenue stream could also enable Lebanon to shift domestic usage towards natural gas from diesel consumption, which would help reduce the import bill and also lower the burden of subsidising the state electricity company by as much as $1.5bn a year.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.