Companies in the oil and gas business in Lebanon have generally been at a standstill following the resignation of Prime Minister Najib Mikati's government on March 22, 2013. The oil and gas sector returned to the spotlight in recent months only to have the curtain soon close again.
Foreign Minister Gebran Bassil told Al-Monitor that when he served as energy minister in Mikati's government, he had responsibility for every matter related to gas reserves in the maritime economic areas belonging to Lebanon in the Mediterranean Sea. When Mikati resigned, his Cabinet had some unfinished business related to oil and gas, namely passing two crucial decrees to begin the licensing process, which was scheduled for August 2013, Bassil said. One decree provided for putting Lebanon’s 10 offshore blocks up for bidding and outlining technical details for a model contract to be signed between the state and the winning bidders. The other decree was the draft law on the taxes oil companies will be required to pay. But the licensing process has never begun.
The government's resignation left a political vacuum that lasted until Feb. 15, 2014, when the current government, headed by Tammam Salam, was formed. During the vacuum, all business related to oil and gas came to a halt, and the situation remained unchanged after the formation of the new government. Nevertheless, on April 6, 2014, Salam announced the formation of a ministerial committee to look into the matter, considered of paramount importance to Lebanon’s economy and prosperity. Yet, the ministers on the committee, including Bassil and Arthur Nazarian, the current energy minister, told Al-Monitor that the committee has not convened since its formation two years ago because Salam has not summoned it to do so.
It appeared, however, that a new agreement on oil and gas had been reached in the late spring of this year, whereby work would shortly be resumed. This development occurred after Bassil paid a visit to parliament Speaker Nabih Berri on June 1. Following the meeting, Bassil held a joint press conference with Finance Minister Ali Hassan Khalil, a member of Berri’s Liberation and Development bloc in parliament. The two ministers announced that an agreement on oil and gas had been reached between Amal, led by Berri, and the Free Patriotic Movement, headed by Bassil. This would accelerate the necessary steps for relaunching licensing to select companies and subcontractors.
Both parties refused to publicly disclose the agreement's content, saying only that they had briefed the government on its details. After so much delay, why was an agreement reached at this point in time? It appears that several factors finally galvanized the parties to act.
The first was a visit to Beirut on May 26-27 by Amos J. Hochstein, special envoy and coordinator for International Energy Affairs at the US State Department. Rumors began circulating in Lebanese political circles and the media that Hochstein had relayed a clear message from Washington: Start investing in gas and oil without delay and without heed to the maritime border dispute with Israel.
Bassil had met with Hochstein during his two-day visit and told Al-Monitor that Washington has an economic interest in maintaining Lebanon’s stability and therefore recommended that it begin drilling as soon as possible.
The second factor involved recent developments in oil and gas fields in Egypt and Cyprus. Experts following the issue told Al-Monitor on condition of anonymity that a number of oil and gas discoveries had recently been made in Egypt and Cyprus, close to the Lebanese maritime border. Some of the international companies involved in those discoveries sent representatives to Beirut to persuade officials there to launch gas projects.
The third factor might be related to the dispute between Lebanon and Israel over the maritime border in the Mediterranean. In this regard, Nazarian told Al-Monitor that this spring, the Energy Ministry had gathered new data that were relayed to various government officials.
The data included new analysis conducted by the company TGS — which the ministry had hired to conduct a survey in the Lebanese area of the Mediterranean — showing gas reservoirs located on the common border between Lebanon and Israel, especially in the southwestern corner of the Lebanese area. Any delay in exploring for gas would prompt Israel to rush to take over Lebanon’s share of the gas reserves.
All these events led up to Berri and Bassil’s announcement of an agreement. Yet, the most surprising aspect is that nothing has been done in terms of implementation almost three months after the agreement was reached. The government has yet to approve the suspended decrees or refer the tax law draft on oil companies to parliament. It thus seems that efforts to exploit Lebanon's oil and gas are back to a standstill.
Some Lebanese, including Interior Minister Nouhad Machnouk, believe that such a significant matter cannot be passed in the absence of a president of the republic, while others hinted that some Lebanese actors object to Berri and Bassil being the only officials involved in the announcement of the agreement and the resolution of the issue. Other parties have alluded to the Gulf states seeking to disrupt Lebanon’s gas exploration, claiming the issue is linked to the outcome of regional developments.
A government official who spoke to Al-Monitor on condition of anonymity believes there is another reason behind the current standstill. That source said that the United States had relayed a new message to Lebanese officials requesting that they agree to negotiations with Israel, under American auspices, to solve the maritime border dispute. This raised the ire of Lebanese authorities who refuse to negotiate with Israel as they consider it Lebanon’s archenemy.
This is apparently what prompted Lebanese authorities to cease moving forward and wait, which also appears to serve the interests of several parties abroad — such as Gulf states that do not want Lebanon to become an oil-producing country — and those in Lebanon who have reservations about the Bassil/Berri agreement, among them the Future Movement, led by Saad Hariri. It seems that the oil and gas issue will remain at a standstill until further notice.