Lebanon Announces New Blocks for Oil, Gas Exploration

Published April 7th, 2019 - 05:19 GMT
Lebanon Announces New Blocks for Oil, Gas Exploration. (Shutterstock)
Lebanon Announces New Blocks for Oil, Gas Exploration. (Shutterstock)

Energy Minister Nada Boustani Friday officially announced that maritime blocks 1, 2, 5, 8 and 10 were up for bidding for in the next oil and gas exploration round.

“We are progressing toward an oil-productive Lebanon,” Boustani said during a news conference from the Energy Ministry.

The deadline for companies to submit their offers is Jan. 31, 2020, she added.

The first round of Lebanon’s licensing process saw blocks 4 and 9 awarded to a consortium of companies - French Total, Italian Eni and Russian Novatek.

Boustani said that drilling in Block 4, set to begin later this year, will take 45-60 days. In Block 9, she said, drilling will begin in May 2020, “and by then we would have signed the contracts for the second round.”

Cabinet Thursday approved the second licensing round, whose purpose, Boustani said, was twofold: to increase exploration in Lebanese waters and boost competition among offering companies.

Lebanese Petroleum Administration chairman Walid Nasr, who spoke alongside Boustani, said all documents related to the licensing round would be available on the LPA’s website.

Boustani emphasized that her ministry and the LPA would commit to transparency during the round, “like we committed to it during the first one.”

The LPA head added that Lebanon has a strong chance of attracting international companies to invest in exploration due to its “promising” maritime geology, its position along the Mediterranean (which he said would also help in gas exporting in the future) and the fact that most of Cyrpus’ maritime blocks have already been contracted.

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Nasr said the LPA decided to open blocks 1, 2, 5, 8 and 10 for exploration in large part because they had different geological characteristics than blocks 4 and 9.

Launching this latest licensing round, Nasr said, was also an important step to assert Lebanon’s sovereignty and invest in the potential resources in its Exclusive Economic Zone.

Blocks 1 and 2 fall along Lebanon’s northern border with Syria, which is disputed. LPA’s Wissam Chbat said during the conference that there was “a difference in perspective from the Syrian side regarding the border, but there are joint committees currently discussing the issue.”

Blocks 8 and 10 are situated along Lebanon’s southern border with Israel. Around 856 square kilometers of disputed water lies in Block 8 - the biggest disputed area of any block. Parts of Block 9 also run through what Israel claims is its EEZ. However, Lebanon says that the maritime map it submitted to the United Nations is in line with a set of armistice agreements signed in 1949 following the Arab-Israeli War.

Block 5 is above Block 8 and is not disputed.

However, a source close to the LPA told The Daily Star that potential “cross-border deposits” between Lebanon and Cyprus lie in an area in Block 5.

A bilateral agreement was signed in January 2007 between Lebanon and Cyprus in which the edges of their EEZs were marked by six coordinates judged to be equidistant between the two countries.

“There are points that need agreement on if cross-border deposits were to be found,” the source said.

Boustani said the issue will be raised in coordination with the Foreign Ministry, especially since Block 5 was “geologically promising.”

The Energy Ministry and the LPA will launch a marketing campaign to boost competition for the licensing round before the Jan. 31 deadline, Nasr said.

After the deadline, both the ministry and the LPA have three weeks to decide what companies will prequalify. After that decision is made, the names of the prequalified companies will be announced, along with those that had not made the cut.

One condition for a company to prequalify, Nasr added, is that it should have previous experience drilling at depths lower than 300 meters. Lebanon’s 10 blocks have depths ranging between 33 and 2,119 meters, according to an LPA map.

The prequalified companies will be further assessed over a one-month period. After that, a negotiation period lasting about two weeks will commence. Then Boustani will bring the results of the assessments and negotiations to Cabinet, which will have the final say on the contracting.

To qualify for an Exploration and Production Agreement, Nasr said, companies must provide two offers, one technical and one financial.

Companies must submit to the LPA the number of wells it will drill during the first exploratory phase, which extends over a period of three years, during which the companies must drill at least one well.

The companies must also share their approach regarding exploration, drilling wells and production along with a technical study on the geology in Lebanon.

The financial offer will be judged based on an economic analysis conducted by the LPA. Nasr said the financial offer will constitute 80 percent of the grade given to the company and the technical offer 20 percent. Based on the total, the companies will be ranked per block.

Throughout the 10-month period from now until the Jan. 31 deadline, companies can assess Lebanon through data gathered by the LPA and the Energy Ministry.

Boustani said some companies have already been examining the data, including British BP, Spanish Repsol, Russian Lukoil and others.

“There are ongoing contacts with many companies. ... Total and Eni are interested too, and we expect and will work on having more companies in [this] second round,” Boustani added.

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