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Zainab Calcuttawala

Zainab Calcuttawala

Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…

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Oil Majors Prepare For Mega Tender In Lebanese Levant Basin

Offshore Oil Rig

After a four-year wait, the Lebanese cabinet has approved two oil and gas decrees on energy tax provisions and blocking last week – allowing offshore drilling ventures in 96 trillion cubic feet of natural gas reserves to begin brewing.

A massive licensing round, stalled in 2013 due to a lack of national unity on energy explorations issues, is set to begin in the country in the next few weeks, with the deadline for submitting bids set for mid-2017.

“Blocks will be opened according to the study carried out by the Petroleum Administration Committee (PAC), as well as according to the requirements of the Lebanese state,” Cezar Abi Khalil, the country’s Minister of Energy and Water Resources told the NNA, describing the new body that will delve into the extraction issues of national offshore production.

Prequalification for Lebanon’s coming round has been closed for over two years now. A total of 46 oil companies submitted their paperwork to participate in the process, back when barrel prices soared above $100.

Lebanon’s delays have effectively caused it to wait out the market vulnerabilities and speculation that plagued the entirety of the international oil and gas industry during the price crunch. It now enters the exploration sector as oil barrel rates top $50 and have been at or above that mark for over a month, set off by an agreement by the Organization of Petroleum Exporting Countries (OPEC) on 30 November to cap output at 32.5 million barrels per day.

The domestic government’s passage of the dual decrees and affirmation of the country’s prosperous drilling future is the result of an international campaign to urge Lebanon to settle its domestic political struggles to create room for an organized energy strategy.

In July 2015, the U.S. Department of State’s special envoy and coordinator for international energy affairs, Amos Hochstein, made a special trip to Beirut to encourage natural gas exploration in Lebanon.

Al Monitor confirmed that the talks included two finer points of discussion: Lebanese-Israeli borders that create exclusive maritime zones for the neighboring countries, and methods for the exploration and extraction of natural gas—which will likely see a particularly high demand in coming years as 195 nations adopt environmentally-friendly energy sources after deepening their commitment to the 2015 Paris climate change agreement. Related: Is A Full Recovery Possible For Iranian Oil And Gas?

Prime Minister Najib Mikati’s March 2013 resignation had left the last two documents necessary to approve international tenders unsigned, according to Foreign Minister Gebran Bassil.

On a local election day last year, politician-turned-businessman Fouad Makhzoumi led an industry-wide forum asking the Lebanese people to support the energy sector and its directionless federal regulator.

“Today, we have started with the municipal elections, which is an indication that people are saying enough is enough,” Makhzoumi said. “If we can help them to organize themselves because of the cause of oil and gas … [to] come down the day of [parliamentary] elections rather than sit and talk, I think we can make a difference.”

Since then, the escalating humanitarian crisis in Syria has pushed millions of Syrians to the Lebanese borders, stretching the small country’s food and water resources and sensitizing the political arena to Israel’s perceived encroachments of its shared border with Lebanon.

Newly elected President Michel Aoun said in his inaugural speech that he would “spare no effort and no resistance to liberate the remaining occupied Lebanese territories and protect [the] country from an enemy which still covets our land, water and natural resources.” Related: Oil Price Rebound May Come Too Late For UK Oil Sector

In addition to delays caused by unending political reshuffles, Lebanon - which shares the Levant Basin with Israel, Cyprus and Syria - has been far behind Israel and Cyprus in exploring and developing its share of resources due to a dispute with Israel over Lebanon’s southern maritime border and a lack of legislation dividing its waters into exploration blocks.

In 2010, the U.S. Geological Survey showed that the Levant Basin held significant oil and gas resources offshore Lebanon, Cyprus and Israel. Israel and Lebanon’s oilfields could overlap, and the concern for the latter country is that Israel has a considerable head start. The two countries dispute a maritime zone that covers over 850 square kilometers and is believed to contain considerable oil and gas reserves.

In the second half of 2016, new seismic surveys obtained by the national petroleum authority showed promising reserves in portions of the Levant Basin agreed to be part of Lebanon.

Six months from now, the closing of the international bidding process on Lebanon’s offshore drilling blocks will herald in a new phase of geopolitical power for the country just as its political process recovers from years of discord.

By Zainab Calcuttawala for Oilprice.com

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