Hariri res­ig­na­tion puts oil and gas at risk

Ex­perts say time of the essence to save what lit­tle head­way has been made

The Daily Star (Lebanon) - - FRONT PAGE - By Brooke An­der­son

Much of the progress in Le­banon’s oil and gas sec­tor will be lost un­less a new gov­ern­ment is formed in the next 240 days, mean­ing time is of the essence to save what lit­tle head­way has been made, ex­perts say.

The sec­tor is on hold in­def­i­nitely fol­low­ing last week’s res­ig­na­tion of Prime Min­is­ter Saad Hariri, and can­not move for­ward with­out a gov­ern­ment in place.

“The pro­ce­dure with oil and gas has stopped. Now we’re back to the 2013 sce­nario: They were about to ap­prove two de­crees – the ten­der pro­to­col and model con­tract, and the block des­ig­na­tions, which were needed at the time, and then [Prime Min­is­ter Najib] Mikati re­signed,” said oil and gas ex­pert Laury Hay­tayan, MENA re­gional pro­gram man­ager and se­nior of­fi­cer at the Nat­u­ral Re­source Gov­er­nance In­sti­tute.

“We had to wait four years un­til we had a new pres­i­dent and gov­ern­ment. In De­cem­ber [2016], the first thing they [the new gov­ern­ment] did was ap­prove the two de­crees and launch a new road map. In Fe­bru­ary, they opened a sec­ond pre­qual­i­fi­ca­tion round [for the bid­ding of en­ergy com­pa­nies].”

Ac­cord­ing to the ten­der pro­to­col, the of­fers are valid for 180 days from the time they are sub­mit­ted.

The en­ergy and wa­ter min­is­ter can then add 90 days based on sug­ges­tions from the Le­banese Petroleum Ad­min­is­tra­tion.

As nearly 30 days have passed since last month’s bid­ding, that leaves just over 240 days for Le­banon to form a new gov­ern­ment be­fore its nascent oil and gas sec­tor goes back to the draw­ing board in an al­ready po­lit­i­cally sen­si­tive and com­plex busi­ness en­vi­ron­ment.

In 2010, en­ergy ex­plo­rations found the po­ten­tial of a sig­nif­i­cant amount of oil and gas in the eastern Mediter­ranean. Then-En­ergy and Wa­ter Min­is­ter Ge­bran Bas­sil claimed that that there could be some 100 tril­lion cu­bic feet of gas and 865 mil­lion bar­rels of oil off the coast of Le­banon.

But most ex­perts and even the LPA de­cline to give es­ti­mates of the po­ten­tial size of hy­dro­car­bon in Le­banon. They stress that the coun­try can only know the ac­tual size of its nat­u­ral gas re­serves when com­pa­nies start drilling.

The reg­u­la­tion of Le­banon’s oil and gas sec­tor is set by the Cab­i­net, the En­ergy and Wa­ter Min­istry, and the LPA.

Last month, the LPA re­ceived two bids to ex­plore for gas in two of the five blocks on of­fer. The con­sor­tium of three com­pa­nies that made the of­fers on two blocks com­prised To­tal SA (France), ENI In­ter­na­tional B.V. (Italy) and JSC NOVATEK (Rus­sia).

Al­though the bid­ding went ahead as planned last month, al­beit with a dead­line ex­ten­sion, only two of­fers for two blocks were made, far lower than the more than 50 com­pa­nies that pre­qual­i­fied. It is per­haps this very fear of po­lit­i­cal in­sta­bil­ity that gave pause to for­eign oil firms.

“The sec­tor in Le­banon has hit a ma­jor bump,” said Sami Atal­lah, di­rec­tor at the Le­banese Cen­ter for Pol­icy Stud­ies, a Beirut-based nongovern­men­tal think tank. “Time is not on our side if the coun­try wants to en­ter into the en­ergy club. One of­fer for each block – that’s quite dis­mal. And these were com­pa­nies that were al­ready op­er­at­ing in the re­gion.”

An of­fi­cial with the LPA, how­ever, speak­ing on con­di­tion of anonymity, ap­peared to be rel­a­tively op­ti­mistic about Le­banon’s prospec­tive oil and gas sec­tor, point­ing to the fact that three for­eign en­ergy com­pa­nies were in­ter­ested in Le­banon.

“We’ll have to wait and see, but we’re cau­tiously op­ti­mistic,” he said. “It’s im­por­tant for the coun­try that we al­ready have two good of­fers.”

Hay­tayan, ap­peared to be more skep­ti­cal and ner­vous about what the prime min­is­ter’s res­ig­na­tion means for a sec­tor she has been pro­fes­sion­ally im­mersed in for the last five years. She asked: “Is a care­taker gov­ern­ment able to take the de­ci­sion to award con­tracts to oil com­pa­nies? I don’t think so. There won’t be any meet­ings of the Cab­i­net. What will hap­pen to the ap­pli­ca­tions?”

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