BLOCKS BOUND­ARIES

Executive Magazine - - Special Report - Source: Le­banese Petroleum Ad­min­is­tra­tion &

of li­cens­ing all blocks to­gether is los­ing the abil­ity to ne­go­ti­ate from a po­si­tion of power in the fu­ture. If some blocks are held back from the first round of li­cens­ing and a big dis­cov­ery is made, there will ar­guably be more in­ter­est in fu­ture rounds and the state might be able to se­cure bet­ter terms. The Le­banese Petroleum Ad­min­is­tra­tion (LPA) web­site lists five blocks as “open” (see map above), sug­gest­ing they will be the only ones up for bid­ding in the first li­cens­ing round. In a writ­ten re­sponse to ques­tions for this re­port, the LPA speaks of “grad­ual li­cens­ing” as a way to “smooth rev­enues.”

THE WAIT­ING GAME

When Le­banon will move from plan­ning how to man­age rev­enues to ac­tu­ally man­ag­ing them is any­one’s guess. A com­mer­cially vi­able off­shore oil and/or gas reser­voir can­not be found un­til holes are drilled into the seabed. Le­banon in­tended to award off­shore drilling rights to oil and gas com­pa­nies in Fe­bru­ary 2014, but cab­i­net’s fail­ure to pass two de­crees (one out­lin­ing the ten­der pro­to­col and model ex­plo­ration and pro­duc­tion shar­ing agree­ment, the other de­lin­eat­ing off­shore blocks up for bid) stopped this very im­por­tant part of this sec­tor’s de­vel­op­ment in its tracks. While the LPA notes that “this de­lay has a high op­por­tu­nity loss cost,” lost time has not nec­es­sari- ly been wasted. Ad­di­tional oil and gas prospec­tiv­ity sur­vey data has been col­lected in the past 12 months (see story page 36), and the LPA says it is re-in­ter­pret­ing ex­ist­ing off­shore data in light of dry wells in a Cypriot off­shore block that borders Le­banon’s acreage with plans to do more anal­y­sis in 2016. The more qual­ity data avail­able to drilling com­pa­nies, the less time spent be­fore well sites are cho­sen. Of­ten coun­tries have no data be­fore sign­ing ex­plo­ration and pro­duc­tion agree­ments, so when those deals are signed here, drilling could be­gin faster than in­dus­try av­er­age. That said, the 2010 law gov­ern­ing off­shore sets a max­i­mum limit for the ex­plo­ration phase at 10 years.

STILL A ROLL OF THE DICE

Given how far away Le­banon is from pro­duc­tion – as­sum­ing it ever gets there as the pos­si­bil­ity of not find­ing a com­mer­cially vi­able dis­cov­ery can never be ruled out – spec­u­la­tion on how cur­rent price trends will im­pact the fu­ture is ar­guably use­less. Worth not­ing, how­ever, are three wells drilled in the past year and the re­minder they bring that for­tune can so easily change. In late 2014 and early 2015, Italy’s ENI and South Korea’s KOGAS drilled two wells in a Cypriot off­shore block near Le­banon’s off­shore acreage. Both were dry. Around the same time the sec­ond dis­ap­point­ment was be­ing bur­rowed into

THE MORE QUAL­ITY DATA AVAIL­ABLE

TO DRILLING COM­PA­NIES, THE LESS TIME SPENT BE­FORE WELL SITES

ARE CHO­SEN

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