Lebanon set to offer five offshore exploration blocks

After a three-year hiatus caused by political wrangling, the Lebanese government is set to offer blocks offshore for oil and gas exploration.

The cables of a side-scan sonar is seen in the waters of the Mediterranean sea, during a tour of areas believed to have gas reserves, off Lebanon's coast near Beirut in 2013. After a three-year delay Show more

Lebanon intends to restart its first oil and gas licensing round after a three-year delay, the energy minister said on Thursday, hoping to kick-start the development of a hydrocarbon industry.

In its first sitting since being formed in December, Lebanon’s new cabinet passed two decrees on Wednesday defining the blocks and specifying conditions for production and exploration tenders and contracts.

Lebanon will offer five offshore blocks for exploration and production and is to hold another pre-qualification round for companies interested in bidding, said the minister of energy and water Cesar Abou Khalil.

The government may qualify more bidders for its first sale of offshore energy licences, and it plans later to announce dates for the historic auction, Mr Khalil said Thursday in Beirut.

“The number of blocks that will be auctioned off in the first licensing round will be five, in line with the gradual auctioning strategy we are pursuing,” he said at the ministry’s headquarters. The government plans eventually to offer a total of 10 offshore blocks for exploration.

The decrees demarcate energy blocks, specify tender protocols and establish the use of production-sharing contracts with investing companies.

Production-sharing contracts will enable investors to share any oil and gas output with the Lebanese government, in contrast to service contracts that would pay the companies a fixed fee for whatever they produce, regardless of market prices.

Lebanese law requires that money from the sale of oil and natural gas be deposited into a national sovereign wealth fund. A law to establish such a fund is currently being studied, Mr Khalil said.

ExxonMobil, Eni, Chevron, Petrobras and Royal Dutch Shell are among companies already qualified to bid as operators. Thirty-four companies are qualified as non-operators, including Marathon Oil, OMV and Dana Petroleum.

Theenergy ministry will consult with the companies to gauge their interest in the auction, and depending on what they say, it will decide whether to hold an additional qualification round, said Wissam Chbat, the head of the regulatory petroleum administration.

Beirut estimates it has 96 trillion cubic feet of natural gas reserves and 865 million barrels of oil offshore, but squabbling between parties has prevented the passage of vital laws needed to develop the sector.

In 2013, 46 companies qualified to take part in bidding for oil and gas tenders, 12 of them as operators, including Chevron, Total and ExxonMobil.

Mr Khalil said he expects these 46 companies to be interested still and that Lebanon will hold another pre-qualification process to increase competition and secure the best deal.

The next stage is for the government to agree a tax regime for the nascent hydrocarbon industry.

On Wednesday, the cabinet also agreed to form a ministerial committee to discuss the draft tax law.

“The committee is committed to finalise comments on the tax law [with] the shortest delay,” he said.

“It might take a couple of weeks, and then we will go back to the council of ministers and we will transfer the [draft] law to the parliament, where it is expected to be passed in the first legislative session.”

* Reuters

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