TotalEnergies secures temporary control of Lebanese offshore gas exploration project 

Oil major TotalEnergies and the Lebanese government have reached a deal handing the French company temporary majority control of an offshore exploration block 9 and paving the way for negotiations with Qatar over a stake in the gas project, two sources said.

TotalEnergies and the Lebanese government have been tussling over the fate of Russian group Novatek’s 20% stake after Beirut announced in September that Novatek would exit.

TotalEnergies can now pursue talks to find a new non-operator partner for what must be a three-way consortium in which the Lebanese state may take a share of any financial windfall, the two sources said.

They added it also allows the Lebanese government to remain compliant with a landmark maritime border agreement with longtime foe Israel, due to come into force on 27.10.2022.

Offshore areas in the eastern Mediterranean and Levant have yielded major gas discoveries in the past decade. Interest in them has grown since Russia’s invasion of Ukraine disrupted flows.

The sources, both familiar with details of the arrangement, spoke on condition of anonymity because they are not authorized to talk publicly about the matter.

Lebanon’s cabinet issued an unpublished decision on Oct. 21, a copy of which was seen by Reuters, assigning the stake previously held by Russian Novatek to a company called Daja 216 and transferring TotalEnergies’s 40% stake to another company, Daja 215.

They gave no details on who controls Daja 215 and Daja 216.

The two sources told Reuters that Daja 215 and Daja 216 are vehicles for TotalEnergies.

“They are just vehicles, ready-made,” one of the two sources said. “This effectively and temporarily gives Total 60% of the consortium.”

TotalEnergies, asked if it controlled Daja 215 and Daja 216, did not immediately respond.

Official French records show that Daja 215 and Daja 216 are both registered to the same address as TotalEnergies’ headquarters in the French capital’s La Defense business district.

A Lebanese energy ministry source said Daja 215 and Daja 216 were “transition entities”.

TEMPORARY TRANSFER

The initial exploration license was held by a tripartite consortium of TotalEnergies, Italy’s Eni and Novatek.

Previously, the Lebanon government said Qatar expressed an interest in joining the consortium.

The transfer of stakes to Daja 215 and Daja 216 was temporary, Lebanon’s caretaker government said in its decision. The two sources said the understanding between TotalEnergies and the Lebanese government was that the French group would enter negotiations with state-owned QatarEnergy over the former Novatek stake.

They added that Qatar was expected to enter the consortium within three months and was seeking a 30% stake, comprised of Novatek’s former 20% stake, and a 5% stake from each of TotalEnergies and Eni.

TotalEnergies did not immediately respond when asked if it planned talks with the Qataris.

Qatar’s government media office, contacted outside business hours, also did not immediately respond to a request for comment.

The exploration license for Block 9 expired on Oct. 22 and under the terms of the license, three signatures were required for renewal, the two sources said.

Block 9 lies mostly in Lebanese waters but a segment lies south of the newly delineated border with Israel. Total and Israel have agreed a separate deal for any revenues emanating from there.

According to the exploration and production agreement for Block 9, published on the Lebanese Petroleum Administration (LPA) website, the consortium exploring the field must consist of three partners.

The maritime border agreement to be signed by Lebanon and Israel stipulates the Block 9 operators will not include “Israeli or Lebanese corporations”.

The caretaker government has also asked the consortium, of which Italy’s Eni is also a member, to deposit 80% of the training fees needed to upskill public sector workers in the energy sector into the Lebanese central bank at the beginning of the financial year.

Source: Reuters