• 3 hours Gunmen Kidnap Nigerian Oil Workers In Oil-Rich Delta Area
  • 5 hours Libya’s NOC Restarts Oil Fields
  • 6 hours US Orion To Develop Gas Field In Iraq
  • 3 days U.S. On Track To Unseat Saudi Arabia As No.2 Oil Producer In the World
  • 3 days Senior Interior Dept. Official Says Florida Still On Trump’s Draft Drilling Plan
  • 3 days Schlumberger Optimistic In 2018 For Oilfield Services Businesses
  • 3 days Only 1/3 Of Oil Patch Jobs To Return To Canada After Downturn Ends
  • 3 days Statoil, YPF Finalize Joint Vaca Muerta Development Deal
  • 3 days TransCanada Boasts Long-Term Commitments For Keystone XL
  • 3 days Nigeria Files Suit Against JP Morgan Over Oil Field Sale
  • 4 days Chinese Oil Ships Found Violating UN Sanctions On North Korea
  • 4 days Oil Slick From Iranian Tanker Explosion Is Now The Size Of Paris
  • 4 days Nigeria Approves Petroleum Industry Bill After 17 Long Years
  • 4 days Venezuelan Output Drops To 28-Year Low In 2017
  • 4 days OPEC Revises Up Non-OPEC Production Estimates For 2018
  • 4 days Iraq Ready To Sign Deal With BP For Kirkuk Fields
  • 4 days Kinder Morgan Delays Trans Mountain Launch Again
  • 4 days Shell Inks Another Solar Deal
  • 5 days API Reports Seventh Large Crude Draw In Seven Weeks
  • 5 days Maduro’s Advisors Recommend Selling Petro At Steep 60% Discount
  • 5 days EIA: Shale Oil Output To Rise By 1.8 Million Bpd Through Q1 2019
  • 5 days IEA: Don’t Expect Much Oil From Arctic National Wildlife Refuge Before 2030
  • 5 days Minister Says Norway Must Prepare For Arctic Oil Race With Russia
  • 5 days Eight Years Late—UK Hinkley Point C To Be In Service By 2025
  • 5 days Sunk Iranian Oil Tanker Leave Behind Two Slicks
  • 5 days Saudi Arabia Shuns UBS, BofA As Aramco IPO Coordinators
  • 6 days WCS-WTI Spread Narrows As Exports-By-Rail Pick Up
  • 6 days Norway Grants Record 75 New Offshore Exploration Leases
  • 6 days China’s Growing Appetite For Renewables
  • 6 days Chevron To Resume Drilling In Kurdistan
  • 6 days India Boosts Oil, Gas Resource Estimate Ahead Of Bidding Round
  • 6 days India’s Reliance Boosts Export Refinery Capacity By 30%
  • 6 days Nigeria Among Worst Performers In Electricity Supply
  • 7 days ELN Attacks Another Colombian Pipeline As Ceasefire Ceases
  • 7 days Shell Buys 43.8% Stake In Silicon Ranch Solar
  • 7 days Saudis To Award Nuclear Power Contracts In December
  • 7 days Shell Approves Its First North Sea Oil Project In Six Years
  • 7 days China Unlikely To Maintain Record Oil Product Exports
  • 7 days Australia Solar Power Additions Hit Record In 2017
  • 7 days Morocco Prepares $4.6B Gas Project Tender
Alt Text

China's Gas Production Hits Three-Year High

In December 2017 China pumped…

Alt Text

Romania Poised To Ramp Up Gas Output

Often overlooked, Romania has huge…

Alt Text

The Most Remarkable Natural Gas Deal Of 2018

The potential first delivery of…

Viktor Katona

Viktor Katona

Viktor Katona is an Group Physical Trader at MOL Group and Expert at the Russian International Affairs Council, currently based in Budapest.

More Info

The Natural Gas Giant To Challenge Israel


When Lebanon’s Prime Minister Saad Hariri paid a visit to Russian President Vladimir Putin mid-September, most media coverage revolved around political and military issues. Yet the meeting was part of Mr. Hariri’s charm offensive to attract foreign investors to Lebanon’s offshore zone, a long-cherished glimmer of hope for the heavily indebted country that has suffered from chronical political paralysis for some decades already.

After a 29-month deadlock during which Lebanon had no president, the team of Hariri and President Michel Aoun was determined to provide a much-needed boost to end legislative obstructionism and get down to work.

Although Lebanon’s offshore licensing round officially began in 2013, the bids of pre-qualified companies are due by October 12, 2017. But is the four-year wait worth it?

If, 10 years ago, Lebanese officials mooted the possibility of kick-starting gas imports from Syria under a 25-year term agreement (never materialized, as Syria couldn’t even meet its own demand) or joining up to the Arab Gas Pipeline initiative, under which Egyptian LNG would be marketed via Lebanon, the last five years have seen a significant change in attitudes and expectations.

Ever since Israel discovered the 17 TCf (0.5 TCm) Leviathan gas field just a few kilometers off Lebanon’s maritime zone, Lebanese officials have taken kindling hydrocarbon dreams to a new level, with the country’s billboards promising more jobs, more investment and better government services as a result of a swift East Mediterranean production ramp-up. Related: Scotland To Permanently Ban Fracking

In 2013, government officials stated that within four years Lebanon will be a gas-producing state—yet as of today, Lebanon produces no gas whatsoever and has no hydrocarbon reserves.

Discovering gas in the Lebanese offshore zone would not only boost Beirut’s profile, it would also bode perfectly with the government’s plans to wind down fuel oil usage in its power generation. In view of Lebanon’s emission-reducing commitments the government singled out natural gas, slated to cover two-thirds of its fuel mix by 2020.

Three major factors have made the accomplishment of this ambitious aim untenable: political deadlock, a maritime boundary dispute with Israel, and heavily strained state coffers. Boundless political infighting, coupled with a palpable lack of accountability and widespread corruption, remains the main reason why Lebanon is still a fully import-dependent nation.

It took Lebanese legislators to adopt the legal groundwork that would stipulate E&P activity in the Lebanese offshore area. The E&P model agreement, the block delineation decree and the petroleum income tax law were all introduced and enacted this year. 

Despite the Lebanese Petroleum Administration’s efforts, this is unlikely to change anytime soon. At the end of the day, however, corruption can be turned to the benefit of oil and gas exploration, so this need not be a crucial issue.

An unsettled maritime boundary dispute with Israel—the exact country Lebanon has the most problematic relations with—complicates the Lebanese task further. Israel is the only Levant basin country that made significant strides in tapping its offshore reserves (the Tamar field has produced since 2013; Leviathan will be brought onstream in 2019), and as such can counteract Lebanon’s offshore goals.

Within the frames of the First Offshore Licensing Block, Lebanon will offer five offshore blocks, two of which might stir quite an international quarrel, as blocks 8 and 9 transgress into territories that Israel considers its own exclusive economic zone (EEZ).

The Lebanese-Israeli boundary reflects the 1949 armistice line. As a consequence, no agreement has formalized the maritime boundary. Israel’s claim bends much further than the assumed right angle one would expect, however, since Israel did not sign the UN Convention on the Law of Sea, Lebanon cannot resolve the issue by means of an international arbitration and has to rely on a bilateral agreement. This difference in the interpretation of relative points creates a legal grey zone of 860 km2, which might very well turn out to be the most gas-prolific area, adjacent to the Leviathan, Zohr and Aphrodite fields. Up until this year, the two sides conducted seismic surveys in the area year and shied away from declaring them prospective blocks.

By including the disputed territories in its licensing round, Lebanon offset a boisterous reaction in Israel, which would have led to the unilateral annexation were it not for the international community’s pressure to resolve the issue via negotiations.

Interestingly enough, polls conducted by Lebanese researchers demonstrate that the overwhelming majority of Lebanon’s populace reckons Israel will try to siphon off Lebanese offshore gas one way or another. Such an all-pervasive suspiciousness and complete lack of trust don’t bode well with the anticipated rise of the Eastern Mediterranean. Yet still, territorial disputes with Israel notwithstanding, there’s no reason why the non-disputed Lebanese offshore territory shouldn’t be developed.

All in all, Lebanon’s offshore zone is divided into 10 blocks that fully cover its alleged EEZ—only three overlap with the contested territories. Blocks 5 and 6 are located just above it and lie at similar depths of 1.6-2 km, so why not drill there first, until all contentions are settled?

The 2013 licensing round witnessed genuine international interest in Lebanese offshore, yet bear in mind that the annual Brent of that year stood at $108/bbl. With a 2017 average of $52/bbl so far, will all the 54 qualified companies as interested as they were in a high-price environment? Moreover, as the example of Cyprus’ Aphrodite field has demonstrated, discovering gas is sometimes not enough, one has to find market outlets for it that are big enough to justify the field’s development.

Lebanon’s gas transformation might be a worthy cause; however, then the nation’s export expansion plans would be largely limited to exporting small volumes to Jordan or Syria. A 2012 3D seismic survey has estimated Lebanon’s total recoverable gas reserves at 25 TCf (0.7 TCm), meaning that building an LNG plant is pretty much out of question. Lebanon’s offshore area is estimated to contain 660 million barrels of oil; however, all adjacent nations focus strictly on gas extraction, so Lebanon will most likely go down the same path. Related: Next Week Could Be A Turning Point For The OPEC Output Deal

Against such a background, now that Syria’s war-ravaged oil and gas sector is destined to witness an increase in Russian participation (a trend that will be massively buttressed politically by the Syrian government), Lebanon might also fall into the Russian sphere of oil and gas influence.

Largely due to its military operation in Syria, Russia has a constructive relationship with both Israel and Lebanon (the reason why Iranian involvement is inconceivable) and bringing it in would even go down well with Lebanese hardliners—and its why American companies will have a hard time.

European companies, especially majors like Total and ENI, are most likely to join in, especially considering that the blocks will be distributed to consortiums.

Despite all the challenges, Lebanon remains an alluring asset. With no national oil and gas company around and a relatively liberal taxation regime, it might grow into Israel’s energy peer.

By Viktor Katona for Oilprice.com

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment
  • Z on October 05 2017 said:
    The sensible answer for Lebanon is simply to negotiate a peace treaty with Israel, which would immediately clear up any question about borders, would completely eliminate any chance of conflict and would turn Lebanon into a very safe bet and thereby initiate an energy boom.

    But because Lebanon was under the thumb of the Syrian dictator, and is now - since Hezbollah's effective coup intimidated the sovereign Lebanese state - under the thumb of Iran, Lebanon won't take any sensible steps to secure its own interests; its masters have no interest in pursuing them, preferring Lebanon as a failed state controlled by private terror armies like Hezbollah.
  • Viktor Katona on October 06 2017 said:
    @Z Whilst I totally respect your point of view, I think the obstructionist approach extends to both sides. Lebanese politicians are highly unlikely to conclude any sort of demarcation treaty with Israel due to political pressure both from Hezbollah and even their own populace that has high hopes to see gas incomes enriching their often destitute lives (made even poorer after the influx of 1mn+ refugees from Syria). Yet in Israel, too, any sort of settlement with Lebanon, in view of their 2006 Lebanon ground invasion and all that followed afterwards, is simply unfeasible for any politician, left, right or center. That is why their demarcation proposal is so ambitious, to say the least.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News