BMI View: Lebanon's first offshore oil and natural gas licensing round has been approved . As of May 2013, bids can be placed. Th is news represents a key step in the development of Lebanon's nascent energy sector, coming just as its neighbours Israel and Cyprus have been pressing ahead with offshore exploration and production activities. Yet despite the Mediterranean's proven hydrocarbons potential, significant domestic and regional political risks may complicate the immediate future for Lebanon's energy sector .
The Lebanese cabinet has cleared the way for the country ' s first offshore oil and natural gas licensing round to proceed. The round had be en delayed for several years. It has previously been set for 2011 and pushed back to 2012. The formation of the Petroleum Administration in November 2012 is a key step in clearing the way forward for the licensing round. The six-member body will be responsible for negotiating with international oil companies (IOCs) and managing the licensing process.
According to the Ministe r of Social Affairs, Wael Bou Fa our, the qualifying round for companies interested in participating in Lebanon ' s licensing round will begin on February 1 2013. A list of qualified IOCs will be issued on March 31, and bids can begin to be placed on May 2.
Lebanese Gas Dreams Inspired By Regional Potential
There is great optimism for the nascent Lebanese energy sector . This is because the Israeli and Cypriot Mediterranean seas have been home to some of the most significant deepwater natural gas discoveries in recent years. Furthermore, a US Geological Survey (USGS) report in 2010 estimated that the deposits in the Mediterranean ' s Levant Basin Province, includ ing the territorial waters offshore Israel, the Gaza Strip, Lebanon, Syria, Cyprus, and the Turkish Republic of Northern Cyprus (TRNC), may contain as much as 3.5tn cubic metres (tcm) of natural gas and 1.7bn barrels (bbl) of oil.
|Lebanon Looking To Join The Ranks|
|Map Of Mediterranean Offshore Fields|
We previously discussed Dolphin Geophysical and Spectrum's launch of a new round of seismic surveys focused on assessing Lebanon's offshore potential ( see August 21 2012, 'Seismic Surveys Set, But Offshore Delays To Continue'). There have also been earlier reports of nearly 30 IOCs which have purchased an initial batch of seismic data - an early indicator of foreign interest in the region's potential.
With up to 15% of the county's GDP spent on energy imports, and no current production of oil or gas, domestically produced hydrocarbons could yield significant dividends for the Lebanon's economy. The country also has the largest debt burden in the Arab world, totalling approximately US$56bn, or 135% of its total annual economic output. In addition, Lebanon had previously been highly dependent upon Egyptian gas, imported via pipeline. As a result of the Egyptian revolution, however, those supplies have become increasingly insecure, with Jordan struggling with the same problem ( see November 15 2012, 'Energy Insecurity Fuels Fiscal Deficit, Popular Frustration').
A Challenging Road Ahead
However, there are significant challenges to the large-scale development of Lebanon's natural gas resources. We believe that the absence of infrastructure, experienced labour, and a supporting oil field services industry will prove challenging. Beyond these loom significant political risks, not the least of which is a contentious disputed maritime border currently undergoing arbitration at the UN. Other challenges include broader political risks, such as the ongoing civil war in Syria. The war is highly volatile and has the potential to spill over into Lebanon. Therefore, the lack of stability in the Middle East could deter investors from realising Lebanon's natural gas potential.