Lebanon: The Oil & Gas Week, September 16, 2013

Lebanon – Country risk:

Potential delay of Lebanon’s first licensing round – we can only speak of delay if the two decrees are not adopted by October 2, 2013 – has indeed affected foreign companies’ original enthusiasm for the bid. Local press is filled with reports on the severe consequences of the delay on companies’ confidence in the country, with several citing anonymous sources, probably originating from the Energy Minister’s entourage to make a stronger case for his lobbying, claiming that many, among the 46 companies that made it through the pre-qualification round, are reconsidering their plans to invest in the country, or even decided to backtrack altogether. In fact, seeking to pre-qualify is a common practice that does not necessarily indicate that a company has the intention to actually place bids. None of these reports mentions which companies have indeed backtracked, which confirms that these are coordinated leaks, likely originating from the minister’s entourage.

As we have mentioned before, tender delays are hardly an exception and companies are aware, to a certain point, of the country risk. They operate on a medium to long-term basis and they take such incidents into consideration. Country risk may be high at this point in time, but strategic perspectives are not perceived on a short-term basis. The decision to participate in the exploitation of a country’s resources is a strategic decision that is not reconsidered at the first bid delay. Of course, this does not mean that local authorities should keep testing their patience. Failure to adopt the two decrees, as a result of the political deadlock, itself a direct consequence of the Syrian conflict, indeed sent negative signals to investors. But, the stabilization of the situation in Syria, with diplomatic initiatives taking over threats of war, may put the process of forming a new cabinet in Lebanon back on track, which would pave the way to adopt the two decrees that are crucial to proceed with the first licensing round. If the two main regional powers, Saudi Arabia and Iran, decide to compromise – following the US-backed Russian initiative to place Syria’s chemical weapons under international control rather than launch a military strike – effects will be felt in theaters like Lebanon, and may “unlock” efforts to form a new cabinet.

Israel – ENI:

The information that Italian energy company ENI may be seeking to enter the Israeli market did not go unnoticed in Beirut. Israeli business magazine Globes reported on 09/09 that the Italian giant wants to transport compressed Israeli gas to Cyprus. ENI, which holds exploration rights in Blocks 2, 3 and 9 in Cyprus’s EEZ, is also eyeing a stake in Lebanese offshore exploration. The Italian company may have solid political/business connections in Lebanon, but an all too obvious involvement in Israel risks affecting its image and may subject it to criticism, if not more, in a country where being associated with Israeli interests is frowned upon. This highlights the importance (for ENI and other companies) of establishing a monitoring system and a regular evaluation of the company’s image (as perceived by Lebanese citizens and officials) with a special attention to communication, including crisis communication. Although not yet pressing, this is an aspect that must not be overlooked.

Middle East Strategic Perspectives – Lebanon’s Oil & Gas Sector: Potential and Opportunities:

Lebanon’s first licensing round may face delays but the process is on track. According to officials in the Ministry of Energy and Water, seismic studies show potential for over 40 tcf of natural gas and significant oil deposits. These potentially large resources have attracted wide attention, with some of the biggest names in the industry eyeing exploration rights in one of the five blocks that are open for bidding (Blocks 1, 4, 5, 6 and 9).

Middle East Strategic Perspectives accompanied the Lebanese oil and gas sector as it grew, providing its clients and online readers a detailed and balanced perspective of the sector, its risks as well as opportunities. MESP is now in the process of preparing a report on the Lebanese oil and gas sector, analyzing its strengths and weaknesses and focusing on its potential and opportunities, particularly for companies and businesses that are seeking to enter the Lebanese market.

Our report, Lebanon’s Oil & Gas Sector: Potential and Opportunities, is intended for oil and gas companies, law firms, local and foreign diplomats, consultants, service providers, bankers, and is designed to maximize their understanding of the business environment, and to anticipate and control the risks inherent to the nature of their work.

We also provide our clients tailor-made customizations. Don’t hesitate to let us know your preferences by October 15, 2013.

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Previous issues of “Lebanon: The Oil & Gas week”:

Lebanon: The Oil & Gas Week, September 09, 2013
Lebanon: The Oil & Gas Week, September 02, 2013
Lebanon: The Oil & Gas Week, August 19, 2013
Lebanon: The Oil & Gas Week, August 05, 2013
Lebanon: The Oil & Gas Week, July 08, 2013