Big Companies Ready to Explore In Lebanon's Offshore Oil Fields

Article Summary
Studies have confirmed the presence of large oilfields in the Eastern Mediterranean, and many international companies want to begin exploration and drilling. Despite the region’s major conflicts, writes Mohammad Ballout, their proximity to Europe still make the fields very attractive.  

International oil companies are waiting for the issues related to the Lebanese governing body for oil to be solved before they start negotiating for gas exploration rights in offshore fields. An adviser to the French oil companies closely following the Lebanese case told Al-Safir that many companies have started drawing maps for their work within the Lebanese-Cypriot-Palestinian [Israeli] maritime triangle. 

According to the French adviser, oil companies are no longer questioning if there are large commercial quantities in the region after many studies have confirmed their existence.  It is now time to take action, and many firms are gearing up to get to work.

The same official said that Lebanon has lost a minimum of five years from when it is able to launch drilling operations in its territorial waters. Lebanese governments were pressured by Turkey to delay any consensus with the Cypriots on determining  their maritime economic zones, which led to Cyprus reaching an agreement with Israel first.

The issue is no longer limited to Lebanon, Israel, Cyprus and Turkey. In fact, Egypt has already initiated drilling operations in the Neritic zone.

While the Lebanese are still settling their issues, several companies are preparing to enter the race for oil exploration in the Mediterranean. These companies include Chevron and Exxon from the US, and France’s GDF Seuz and Total, which even moved its team from Syria to Beirut. China and its state-run firm CNOOC, is also showing interest in the region, along with Russia’s Gazprom.

According to the French adviser, this growing international interest will likely further complicate geo-strategic dimensions. The gas-oil factor has become an addition of the conflict that is already plaguing the regional and international powers. Thus, there will be increasing competition for political influence on the decisions taken by the concerned governments.

In addition to the large reserves distributed among six of the region’s countries (Lebanon, Syria, Cyprus, Turkey, Israel and Egypt), the major companies are also aware of the major maritime border disputes involving all of them: Egypt has maritime border problems with Israel and there are cross-border disputes between Cyprus, Lebanon and Israel. The largest field in the area, Leviathan, whose natural gas reserves are estimated to be roughly 453 billion cubic meters,  is particularly disputed.

Turkey is now also in the game. In fact, Turkey’s state-run oil company has already started exploration operations in the waters of the Republic of Northern Cyprus. The French adviser said that Syria is likely to join the list of undersea wealth contenders  at a later stage.

All of the oil companies that may be granted the rights of exploration, exploitation and management of gas fields will avoid working in the disputed areas. This primarily applies to those that received offers from Israel.

There are ongoing consultations to identify areas that can be exploited without provoking border conflicts and security crises.  Attention will primarily be focused on projects that wall within a certain country’s clear sovereign boundary.

The US envoy to Lebanon, Frederick Hoff, encouraged exploration operations in the disputed areas. This is where the idea of the "maritime blue line" [between Lebanon and Israel] was born as a substitute to the demarcation of a maritime border, which is currently impossible.

Cypriots and Israelis have achieved great progress thus far towards the exploitation of the discovered fields. Prime Minister Benjamin Netanyahu visited Cyprus last March and signed off on a Cypriot-Israeli partnership for gas exploration. They also consolidated and accelerated of operations by assigning the Cypriot and Israeli areas to oil giant Noble Energy alone.

The French adviser said that the international companies are convinced of the existence of important offshore fields in the Eastern Mediterranean region. They also indicated that the work conditions with the Lebanese have become quite clear for them.

Lebanon's petroleum law imposes the establishment of a diverse consortium to exploit the oil.

Bids are likely to distribute drilling operations among companies that specialize in submarine operations, while exploitation and liquefaction operations will be assigned to another foreign team. Both operations will be carried out under the supervision of a Lebanese national team.

Companies that will work in the region are likely to take the geo-strategic situation into account and may suggest the establishment of a pipeline to transport gas to Cyprus for exportation.

Other suggestions include the establishment of floating exportation ports that are linked to the pipelines of extraction from the fields near the south of Lebanon. For security purposes, this is the proposal most companies consider because floating ports can be displaced if security factors require such an action.

Companies are estimating that one floating port will cost roughly €5 billion. The consortium, which will begin working when the Lebanese government give its consent, needs a budget of $10-12 billion for the exploitation of one field.

The French adviser said that the Qataris are closely following the oil developments in the region, and they are aware that exploration operations may reveal the existence of large gas reserves.

The proximity of the eastern Mediterranean oil fields to Europe and the simplicity of transferring gas to European ports constitutes a strategic advantage, meaning that the regional players could be potential rivals for the Qataris. Consequently, they will further rely on Asia, the major importer of Qatari oil products, despite attempts to find quick rail lines to transport oil to Europe.

Found in: oil and gas, oil, noble energy, maritime economic zone, maritime borders, leviathan, gazprom, floating ports, exxon, drilling operations, drilling, chevron

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