Bottom Line: The sweeping parliamentary endorsement of Sunni politician Tammam Salam to become the country’s next prime minister is a major boost for stability and removes a great deal of uncertainty surrounding the future of Lebanon’s Levant Basin oil and gas potential.
Analysis: On 6 April, Salam won support from all major factions—including the Shi’ite Hezbollah-led March 8 coalition and the Sunni-led March 14 alliance—for the post of prime minister. The level of uncertainty has been high following the resignation of prime minister Najib Mikati, and sectarian tensions and the spillover from the conflict in Syria were looming threats. Those threats still exist, but we can now consider them reduced. With Salam in place and enjoying broad support, Lebanon has a much greater capacity to deal with its pending challenges.
Over 50 companies have taken part in the pre-qualification round for bidding on Lebanon’s first offshore licenses. Among them are Royal Dutch Shell, Chevron, ExxonMobil, Total SA, Norway’s Statoil, Russia’s Rosneft OAO, and Italy’s Eni SpA. Some 30 companies from 20 countries purchased seismic data on the potential reserves, netting Lebanon over $34 million in revenues. The attractiveness of Lebanon’s offshore blocks is boosted by the fact that production has just begun at Israel’s Tamar gas field in the Levant Basin. Lebanon’s Petroleum Administration has been in existence for less than half a year, so this compounds the risk for investors, but geology and geographical proximity to other Levant Basin finds, plus a new injection of political stability despite the ongoing crisis in Syria should help restore confidence. The country’s offshore territory remains entirely unexplored.
Recommendation: Though Salam must now form a new government, and elections scheduled for June may be delayed, we do not expect this to hinder the awarding of exploration licenses for Lebanon’s portion of the Levant Basin, largely because Salam has such broad support across parties and across the sectarian divide.