Energy & Mining
Blessing or Burden?
While Egypt’s offshore gas industry has been up and running for years, Israel inaugurated the 237 billion-cubic-meter (bcm) Tamar Field in December 2012 and hopes to tap into the 453 bcm Leviathan Field by 2016. The Cypriots started the exploitation of the 226 bcm Aphrodite Field in December 2011 and, one year later, signed exploration and production agreements for another 12 offshore blocks. Cyprus is also in talks with Israel and three major energy firms to build a $6 billion Liquefied Natural Gas (LNG) terminal.
Compared to its neighbors, Lebanon is lagging behind. Due to bickering between the country’s many political and religious factions, it took years to establish the required regulatory and institutional framework, which by late 2013 had still not been finalized.
While the seismic surveying of Lebanon’s coastal waters started as early as 2000, the country’s Offshore Petroleum Resources Law (OPRL) was only passed in parliament in 2010. It took another two years to ratify the legislation. By the time Israel saw its first gas platform arise on the horizon, Lebanon finally welcomed the Petroleum Administration (PA), the governmental body charged with implementing the OPRL. The PA’s six board members represent six different religious and political factions.
It seemed 2013 would finally be the year of the great leap forward. On April 18, the PA announced that 46 out of 52 companies had successfully qualified to bid for exploration and production agreements in 10 offshore blocks varying in size from 1,400 to 2,300 square kilometers. The first bidding round was set to start in May, yet was postponed due to the resignation of Prime Minister Nijab Mikati.
He and his cabinet stayed on in a caretaker capacity, yet by the end of 2013 they had still proven unable to pass two crucial decrees. The first concerns the exact boundaries of the 10 designated offshore blocks, while the latter determines the details and guidelines regarding the production sharing agreements.
Following several previous delays, Lebanon’s caretaker Minister of Energy and Water, Gebran Bassil, in October announced that the deadline for the pre-qualified firms to submit their bids in a first licensing round was postponed yet again until January 10, 2014. He also said that blocks 1, 4, 5, 6, and 9 would be available for bidding once the cabinet held an extraordinary session to endorse the two decrees.
“Success of the first licensing round hinges on three factors,” Georges Sassine, a Lebanese public policy expert currently working for General Electric, told TBY. “Start drilling as soon as possible, negotiate the most favorable terms, and have all policies and institutions in place to ensure the sustainable and transparent development of oil and gas resources. All these factors need to be in place to ensure success. In a way, political delays might be a blessing in disguise, as long as Lebanon continues to develop the right policies. The question is: are they taking advantage of the extra time or just waiting around?”
An additional and potentially much more explosive problem facing Lebanon is the suggested boundaries of offshore block number 9, as they are contested by the country’s southern neighbor Israel. While both countries agree that Ras al-Naqoura is the shared land border, they have reached opposing conclusions regarding the limits of their respective Exclusive Economic Zones (EEZs). The disputed maritime area is shaped as a triangle and measures 870 square kilometers.
Unfortunately, the problem cannot be solved through direct negotiations, as the two countries are de jure still at war. In 2010, Lebanon submitted its claim to the UN, with Israel following suit one year later. However, this is unlikely to help much, as Israel never signed or ratified the UN Convention on the Law of the Sea.
US officials have been mediating between the two countries. According to Lebanese daily As Safir, the border dispute was the main topic of discussion in a meeting in Washington on October 1, 2013, between Israeli Prime Minister Benjamin Netanyahu and US Vice-President Joe Biden, who handles the oil and gas dossier for the Eastern Mediterranean.
Developed by the Marshall Institute and adopted by the Obama administration, the US strategy aims to exploit the gas issue to help conclude political settlements. It calls, among other things, for building a gas pipeline from Israel and Cyprus to Turkey. On paper, Lebanon would be able to join once it starts extracting gas. In reality, seeing Lebanon’s troublesome relations with Israel, that is highly unlikely.
“The US has been the only country that’s been showing concern, interest, and initiative in mediating a peaceful resolution,” said Sassine. “If other countries have the capacity, interest, and profile to be an honest broker then Lebanon should work diplomatic channels and enlist the country it thinks is best suited to lead such a delicate initiative.”
Meanwhile, the tension is gradually rising. Hezbollah has warned numerous times that it would retaliate against any Israeli attempt to “steal” Lebanon’s maritime resources. Likewise, Israel has warned it would use force to defend its gas fields.
Israeli border expert David Kornbluth told Globes Magazine that there is room “to demonstrate sovereignty” by having navy ships patrolling the Israeli line. In addition, he suggested that several formal actions should be taken immediately, such as making an official statement, approaching a third country to act as a broker, and warning the foreign companies participating in Lebanon’s tenders about the dispute.
That Israel means serious business may be illustrated by the fact that Israel Aerospace Industries on October 1, 2013, won a contract to supply the Israeli navy with three Super Dvora-class Mark III fast patrol craft to bolster maritime security. Their main function, according to a company press release, is to protect offshore Israel’s gas fields from any seaborne attacks.
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