Energy and Water Minister Cesar Abi Khalil said during the opening session held within the framework of the Lebanon International Oil and Gas Summit that the abundant existence of hydrocarbons is reflected in the fact that a big number of companies applied to the first licensing round out of which 51 international oil and gas companies prequalified, and this number is five times more than any other regional country has achieved.
Abi Khalil said that surveys of Lebanon’s geology have indicated an abundance of hydrocarbon resources in the country’s territorial waters.
“This fact attracted a big number of international companies that bought the geophysical information from the Lebanese government,” the minister said.
The minister said that another advantage of the oil and gas sector in Lebanon is the governance system which was created by benefitting from the expertise of people who have long worked in the field.
“We have benefited from the expertise of other countries that have worked in this sector. We examined their failures and successes and we took all measures possible in the legal framework to prevent failures and to repeat and multiply their successes,” he said.
“The Lebanese people can rest assured that they have one of the best governance systems in the world.”
Abi Khalil noted as well that all decisions in the sector are taken in coordination with LPA, the Cabinet and the Energy Ministry, and to ensure transparency.
The contested territorial waters between Lebanon and Israel will not deter major oil companies from exploring oil and gas in the blocks that were put up for bidding by the government, the head of the Lebanese Petroleum Administration said Tuesday. “The so-called disputed zone along the Lebanese-Israeli maritime border is not considered a risk factor by major oil companies,” Wissam Chbat said.
“This is one of the risks that can be mitigated,” he added.
Chbat said that oil companies that prequalified for the first licensing round will assess the geological and political risks to decide whether to take part in the tender for oil and gas exploration off Lebanon’s coast.
“Companies will assess the risks involved but we have been told by major oil companies that the so-called disputed zone will not prevent them from drilling in Lebanon’s offshore [waters],” he said.
A prequalification round started on Feb. 2 and continued until March 31. Companies will be able to submit bids on the open blocks until Sept. 15.
“Around 51 oil companies were accepted in the prequalification round but this does not mean that all of them will take part in the tender,” Chbat said.
“Some of the prequalified oil companies may decide not to participate in the tender,” he added.
Chbat said the LPA will assess applications submitted by oil companies and then it will send a report to the Cabinet, which will decide by Nov. 15 on the companies that will win the tenders, and the first contract will be awarded before the end of the year.
Chbat gave a presentation about the challenges facing the oil and gas sector in Lebanon by saying that these can be divided into two categories: above-ground challenges and underground challenges.
He explained that underground risks include the presence of source rocks, presence and effectiveness of the seal and a difficult drilling environment in addition to many others.
Above-ground challenges include political and regulatory risk in addition to other kinds of risks related to oil prices, cost, health, personal safety and the environment.
“Oil companies usually attempt to understand properly the political and regulatory risk before committing to any action,” he said.
“The government should work on reducing the political and geological risks to an acceptable level and mitigate other risks in order to create an investor-friendly environment.”
With the aim of reducing this risk, Chbat explained that Parliament would approve the taxation law before the end of this month.
“The objective of the government is to reduce political and regulatory risk through this well-designed legal framework,” he said.
Chbat added that political and regulatory risk may also include policy change, security, government stability and energy regulatory framework predictability.
For Nick Nawfal, vice president of Baker Hughes, an oil field service company, the security factor is not a big issue in Lebanon.
“International operators work in many countries in Africa, Asia, Iraq and Yemen where security is much worse than what is happening in Lebanon,” he told The Daily Star on the sidelines of the summit.
“I am not much concerned about the situation and if we put the tender out, there will be many companies who are interested to drill on Lebanon’s offshore.”
Nawfal’s comments were reiterated by Chbat, who said that the delay in exploration in Lebanon is not bad news at all because of the discovery of Egypt’s Zohr gas field in 2015, which changed the mindset of companies.
“It is not always negative to wait because companies are aware today that Lebanon has on its offshore buildups that are similar to those discovered in Egypt,” he said. “We have similar structure of carbonates in Lebanon.”
“Also, the template of the exploration and production agreement is in the official gazette and it is nonnegotiable,” he said, adding that Lebanon has declared its intention to join the Extractive Industries Transparency Initiative even before starting the exploration phase in a bid to ensure transparency.
“There is always a risk of someone breaching the law somewhere and this is why we have a very transparent legal system,” he said.
Source: The Daily Star