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