A senior U.S. official advised Lebanon not to drill in disputed waters off its coast until a deal on maritime boundaries is reached, adding that Washington was working on ways to resolve competing claims over the territory.
“I think the most advisable policy for choosing where to drill is to reach an agreement on the disputed zone so there isn’t a disputed zone. I think it would be good not to touch the disputed zone until there is a resolution for this dispute,” Amos J Hochstein, U.S. deputy assistant secretary for energy diplomacy, told The Daily Star in an interview.
He added that most oil companies were not willing to risk drilling in disputed zones, claiming that firms preferred to work in areas that were within the recognized Lebanese territorial waters.
“People need to understand that oil companies take lot of risks, more than any industry. They spend an enormous amount of money – over $100 million – to drill one well before knowing if there is gas there. And once they discover it, they spend more money to exploit it and it takes years to bring your money back,” Hochstein said.
The zone is thought to contain abundant quantities of valuable natural gas, and Lebanon has been keen to demarcate the area in order to determine its share of the possible resources.
Hochstein said that the United States has been suggesting ways to resolve the dispute between Lebanon and Israel, but declined to give any details about the proposals.
“The maritime dispute between Lebanon and Israel needs to be resolved. We [the United States] have gone to both sides on a number of occasions to share some ideas on how to solve this issue. The reason that it is critical to resolve this dispute between Lebanon and Israel is because in order to attract investments, there needs to be some kind of accommodation. There has to be certainty that the investments will be sound,” the official said.
He added that companies were eager to begin drilling in Lebanon, especially since nearby Israel and Cyprus have proven reserves.
But Hochstein warned that further delays in resolving the issue of the disputed waters could dampen investor appetite
“The longer you wait on resolving this dispute, the less likely it is that international oil companies will wholeheartedly invest in that area. For this reason, we have come up with certain ideas to solve this issue.”
He admitted that reaching an agreement would be difficult.
“These are not easy decisions to make,” he said.
“We hope that some of these ideas will stick and become attractive enough,” Hochstein said.
Despite the difficulties of reaching an agreement, he remained upbeat about the prospects of resolving the issue.
“The main goal here is to allow Lebanon to be in a position to attract foreign investors: come to the offshore of Lebanon and be part of the economic revival,” Hochstein explained.
He said the United States was coordinating with the United Nations in resolving the issue of the disputed zone.
Hochstein urged the Lebanese not to miss the opportunity to exploit their country’s gas and oil wealth.
“Lebanon would be able to transform its economy if in fact there is gas. Before anyone plans what to do with the gas, first you have to find it, and seismic data is important but it’s not decisive. You have to drill a hole in the ground to find if there is gas.”
A 3-D seismic survey of part of Lebanon’s waters showed that Lebanon has an estimated 25 trillion cubic feet of gas off its coast.
Apart from the prospects of high revenues, the U.S. official emphasized that a major gas find would allow Lebanon to secure cheaper energy, which would be a major boost for the economy .
Hochstein said it was up to the Lebanese government to decide whether to auction off all 10 blocks off the coast or to begin with just three or four of them.
“Ultimately every country is a sovereign of its territory to make its own decision. I think for a country which has not done this before and the experience of going to a big round, it would be beneficial to argue this one at a time, or one or two or three at a time, and not by negotiating all [10 blocks],” he said.
Hochstein did not see a major problem if Lebanon delayed the April 10 auction date one more time in order to ensure political consensus.
“It’s always ideal to run things on time. But I think it’s better to delay than to launch it before its ready. If you launch something before there is political consensus then this will have risks too because if companies invest money and resources and later the political attitudes change then this is worse. I think it would be good for Lebanon to move quickly and at the same time it is better to move correctly,” Hochstein said.