EXPLORING A BRIGHT FUTURE

Lebanon 2017 | ENERGY | FOCUS: FUEL EXPLORATION

Exploration of offshore hydrocarbon fields looks promising, but internal and external political challenges may pose a threat.

After years of preparations and delays since the Lebanese Petroleum Administration (LPA) launched a pre-qualification process in 2013, the Minister of Energy and Water, Cesar Abi Khalil, announced the opening of a tender to develop several offshore oilfield blocks on January 4, 2017.

This year, eight new international oil and gas companies have been prequalified for work on Lebanon's offshore oilfields, bringing the total number of pre-qualified companies to 53, including those accepted in 2013 and which still meet the pre-qualification criteria. In 2013, dozens of companies pre-qualified to bid for oil and gas tenders; however, political uncertainty halted the first round of the auctioning and licensing process. Now recommitted to developing its oil and gas industry in 2017, the LPA and the Lebanese government expect to receive final offers from companies competing for the exploration of the blocks in September and announce the winners in November.

According to various studies, Lebanese waters contain 850 million barrels of oil and no less than 2.7 billion cubic meters of natural gas. This amount is similar to Israel's potential, including fields that have already been discovered. In fact, many of Lebanon's blocks currently extend along the edge of an unresolved maritime border that is subject to much dispute with neighboring Israel. During the Eastern Mediterranean Gas Conference, held in Cyprus on March 2017, Lebanese representatives were asked whether the blocks overlapped the disputed territory with Israel; they claimed that there is almost no overlap. The development of these blocks by Lebanon is therefore also a strategic move to protect its resources along a contentious border.
Also at the conference, Wissam Chbat, President of LPA, informed delegates that the potential for finding oil and gas in each of the blocks was medium to high—Chbat said that Block 1 has medium-to-high potential for discovering fossil fuels; Block 4 has medium potential for discovering oil, gas, and perhaps condensate; Block 8 has a high potential for gas and a little condensate; and Blocks 9 and 10 have particularly high chances for oil, gas, and condensate. He also added that most of the gas would be exported.

More than the potential for discovering fuels themselves, Lebanon's hopes are invested in the potential revenues that the expanded sector could bring. Some predictions suggest income from the oil and gas sector could peak at about 9% of state revenues when production is at its maximum and then gradually decrease.
Experts are now suggesting Lebanon take steps toward improving governance, since the country must now build a base to properly manage the wealth derived from fossil fuels. The main lesson from other resource-rich countries is that, without solid governance based on strong institutions, rule of law, effectively implemented rules and laws, and so forth, newfound energy prosperity is likely to generate more corruption. Considering that the auctioning and exploration of these blocks was delayed due to political instability, Lebanon will need to parallel its hydrocarbon industry development with the strengthening of national governance.
There is a lot at stake for Lebanon. As a troubled country in a tumultuous region, the country could transform itself by effectively and efficiently managing its potential oil wealth.