Lebanon: The Oil & Gas Week, December 09, 2013

Lebanon/Israel – Maritime border dispute:

The determination to exploit offshore resources is pushing some officials to show certain flexibility and creativity by envisaging new options to contain, rather than enflame, the tension resulting from the maritime border dispute between Lebanon and Israel. Results are not guaranteed, but for the moment, the trend seems positive.

In an interview he gave to a local newspaper, caretaker Energy Minister Gebran Bassil revealed that, although Lebanon cannot sign an agreement with Israel on exploiting common hydrocarbon fields, nothing prevents international oil and gas companies from doing so (Assafir, 27/11). On 29/11, it was revealed in the same newspaper that US Deputy Assistant Secretary for Energy Diplomacy Amos Hochstein submitted a proposal to Lebanese authorities during his last visit to Lebanon on November 19, which included a plan to draw a maritime “blue line” similar to the one established by the United Nations in June 2000 to demarcate the Lebanese-Israeli borders following the withdrawal of Israeli troops from southern Lebanon. The line is temporary in nature and is meant to contain the present tension between the two countries by prohibiting any exploration within the disputed area until a solution is reached.

The Lebanese side seems receptive to the idea, with Prime Minister Najib Mikati calling it “logical” and Energy Minister Gebran Bassil agreeing with Hochstein that the issue is not just about “borders and lines” [see the transcript of our discussion with Hochstein in Lebanon: The Oil & Gas Week, November 25, 2013]. Israel, which is seeking to buy German missile boats to protect its offshore installations after it previously bought six Dolphin submarines, did not react to the proposal, but Hochstein reportedly submitted it to Lebanese officials following his visit to Israel, which implies a certain backing.

Lebanon would also like the United Nations to be involved. Speaker Nabih Berri, always keen to pass as the provider of solutions in Lebanese politics, seized the idea and made a counter-proposal for the Americans, requesting the UN to draw a temporary maritime border, which he renamed as “white line.”

In any case, the details, including the involvement or not of the United Nations, have yet to be defined. The proposal, if accepted by Lebanon, has to be approved by the government, which is currently acting in a caretaker capacity. PM Mikati has so far rejected calls to hold a cabinet meeting to adopt two decrees that are crucial for pursuing the first licensing round, stating that a caretaker government does not have the authority to issue decrees. Mikati may be willing to negotiate his stance if this consolidates his political positioning. Lebanon is currently on a “wait and see” mode. The impact of the Syrian crisis and the resumption of contacts between the US and Iran are expected to be felt in Lebanon and on the balance of power among Lebanese factions. Most politicians, influential or not, are seeking to ensure a role in the next phase and are open for negotiations.

Lebanon – First licensing round:

Lebanon’s first licensing round for offshore exploration has been postponed twice in recent months due to the inability to proceed with the tender in the absence of a decree defining offshore blocks and another one approving the model exploration and production agreement. Caretaker Energy Minister Gebran Bassil has been repeating recently that he is refraining from delaying the tender, scheduled on January 10, 2014. In his opening speech at the Lebanon International Oil and Gas Summit, which was held in Beirut on December 4-5, he announced that the tender will proceed as scheduled. Bassil did not clarify on what grounds he intends to proceed with the bid. The legality of his move, in the absence of a governmental approval, is questioned. It is unlikely that international oil and gas companies would rush to bid in such circumstances. In any case, there is still enough time to either postpone the tender, if the decrees are not adopted, or clarify the legality of the move if he intends to proceed with it.

Lebanon – Tender to import LNG:

The Ministry of Energy and Water launched a tender to import liquefied natural gas on December 6, 2013. The deadline for placing bids is January 20, 2014. The Ministry will then hold a round of negotiations with the five companies that submitted the best offers. The tender is part of a project involving the acquisition of a Floating Storage and Regasification Unit (FSRU) and the import of LNG to generate power. The winner of the FSRU tender will be announced by the end of the year. Pre-selected companies include: BW Gas Ltd; Excelerate Energy UK Limited; Golar; Höegh LNG AS; Itochu; MISC Berhard; MITSUI & CO., LTD; Mitsui OSK Bulk Shipping  (MOL); Samsung C&T Corporation; SHELL; Teekay LNG/Larson Toubro; UniGas (Gulf Leighton L.L.C, Leighton Offshore PTR, Keppel Singapore; Waller Marine/Wartsila Hamworthy/buildum ventures.

Lebanon International Oil and Gas Summit:

Over 400 participants, sponsors, exhibitors or delegates took part in the second Lebanon International Oil and Gas Summit (LIOG), organized in Beirut on December 4-5, despite the unstable security situation, which has caused the cancellation of several other conferences in the past months (including oil and gas conferences). The event was organized by Planners and Partners and Global Event Partners and held under the patronage of the Ministry of Energy and Water and in collaboration with Lebanon’s Petroleum Administration. LIOG 2013 was endorsed by the International Gas Union (IGU) and sponsored by a number of companies that have made it through the pre-qualification round, including Dana Gas, Petroleb, CCE and Mubadala. The absence, at this level, of companies that qualifies as operators was however noticeable.

Previous issues:

Lebanon: The Oil & Gas Week, November 25, 2013
Lebanon: The Oil & Gas Week, November 11, 2013
Lebanon: The Oil & Gas Week, October 28, 2013
Lebanon: The Oil & Gas Week, October 14, 2013
Lebanon: The Oil & Gas Week, September 23, 2013