Lebanon Pulse

Political Disputes Delay Lebanon’s Gas Projects

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Article Summary
In light of Lebanon’s governmental vacuum and developments in neighboring Syria, certain parties want to delay the bidding process for exploration rights to the country’s offshore gas fields.

The time schedule that was set by Lebanon’s Ministry of Energy to explore and extract gas from the Lebanese maritime economic zone in the Mediterranean was once again delayed, due to the political situation and bickering between officials. The new date — which is likely to be postponed for the same reasons, despite the efforts exerted by the energy minister to prevent such a delay — is scheduled for today, Monday, Sept. 2.

On April 18, Gebran Bassil, Lebanon’s energy and water minister, announced the final list of companies that made it through the pre-qualification round and are eligible to participate in the first licensing round for gas exploration and extraction. This included 46 international oil companies, which were approved to act as operators, non-operators and right holders.

At the time, during a press conference held less than a month after the resignation of the cabinet, Bassil said that 12 companies were qualified to bid as operators, namely Anadarko, ExxonMobil, Statoil, Shell, Repsol, Maersk, Total, INPEX, Petronas, Chevron, ENI and Petrobras. In addition, 34 companies were qualified to bid as non-operator right holders.

The difference between the two categories is that operators are in charge of planning and executing the exploration and extraction processes. Non-operators, on the other hand, are responsible for other aspects, notably legal and financial issues. To prevent any potential monopoly, the Lebanese Hydrocarbon (Offshore) Law No. 132 of 2010 stipulates that the operator must establish a consortium comprising at least two other companies. The latter two, along with the operator, shall be financially and legally responsible.

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On this basis, May 2 was the date set for the submission of license applications. Since that day, it has been well-known that some legal decrees are still needed to launch the licensing round. While the competent ministry had already completed these decrees and referred them to the council of ministers, the latter had delayed enacting them for reasons that were unknown at the time. Among the suspended decrees on the prime minister’s desk was the one pertaining to specifying the maritime blocks — which numbered 10, according to the ministry — in addition to the exploration and production agreement, conditions document and the strategy adopted to grant permits. Bassil seemed reassured that these decrees would be duly passed after the formation of the new government, or at the hand of the resigned government through a constitutional extraordinary session.

On April 29, the representatives of the companies came to Beirut to participate in the launching of the first extraction licensing round. The round will continue until Oct. 4, the date on which companies must submit their proposals, provided that, a month prior, the governmental decrees would be passed.

Afterward, Lebanese authorities will study the proposals within a period of time ending in January 2014. Then, negotiations will take place and contracts will be signed. Finally, the exploration and extraction processes will be launched and will last for 18 months, before production begins.

Days have passed by and the new government has yet to be formed. It is nearly a month prior to Oct. 4 and the decrees have still not been passed. Weeks ago, Bassil visited the Lebanese president, prime minister and speaker of parliament, asking for an extraordinary session to be held to pass the needed legislation. Bassil regarded this subject as pressing and necessary, especially after the Israeli announcement of the discovery of the Karish-1 field, adjacent to the Lebanese maritime borders. Yet, despite all these compelling reasons, the session was not held. Sept. 2 has come and there are still no decrees to duly launch the bidding process.

What are the real reasons behind this delay?

Sources concerned with this strategic and delicate issue for Lebanon affirmed to Al-Monitor that the reasons behind the delay are various and have many ramifications, the most prominent of which are:

First, some political powers seek to discredit Bassil's great achievement with regard to such a significant matter. They prefer to lose money, time and a good opportunity to let their opponent win.

Second, some may have business interests with monopolistic purposes. In fact, in its reports that were submitted to the government, the Ministry of Energy and Water had already decided that it would not launch the bidding process for all 10 maritime exploration blocks at once, because the total number of qualified companies is 46, and by law, each group shall only be formed of three companies. This means that the number of winning groups cannot exceed 12, and subsequently if the bidding process for all 10 blocks were to be launched at once, this would inevitably reduce competition on each block, as well as leave the doors open for side deals between the different groups with regard to block allocation. As a result, prices would be reduced and Lebanon would suffer lower profits. Therefore, the Ministry of Energy and Water insists on not launching the bidding process for all blocks at once and proceeding according to a phased program.

Moreover, one of the key stakeholders does not rule out that this is what is actually driving politicians to stall issuing decrees, so as to pressure the ministry to change its proposed strategy.

Third, it seems that there are some big governmental concerns and foreign interests, which would also contribute to the obstruction of this project. An informed source told Al-Monitor that a senior state official said that a major Gulf figure has been pressuring governmental officials to stall and waste time, in the hope of forming a new favorable government, especially following the developments in Syria. Thus, it would be possible to launch a bid under the auspices of a different government and ministry, which would be loyal to the Gulf side.

The same source added that this senior official has had doubts since the announcement of the list of qualified companies more than four months ago. Back then, he noticed that the companies affiliated with this Gulf figure did not apply for the bid and did not even express interest in the project that many international European and US companies were competing for.

Fourth, according to Lebanese political leaders, Lebanon has been held up from improving its financial conditions, relieving its deficit and settling its debts, especially its external ones.

The political leader said that these same problematic issues are the reasons behind Lebanon's debts in the first place, to push it toward further international financial dependency and make it more vulnerable and compliant when it comes to regional settlements, especially regarding the conflict with Israel, and the half a million Palestinian refugees residing on Lebanese territory.

What can the minister of energy do amid these interests and schemes? Bassil refused to delve into these issues. He continues to confirm that his ministry will carry on with its decided work.

In the event that the resigned government fails to issue decrees before September 2013, Bassil has the power to extend the bidding process by a period equivalent to the length of the forced delay, which is standard procedure in many countries. Nevertheless, Lebanon will undoubtedly become an energy-producing country against all odds.

Jean Aziz is a contributing writer for Al-Monitor’s Lebanon Pulse. He is a columnist at the Lebanese newspaper Al-Akhbar and the host of a weekly political talk show on OTV, a Lebanese TV station. He also teaches communications at the American University of Technology and the Université Saint-Esprit De Kaslik in Lebanon.

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Found in: water, lebanon, gas, energy

Jean Aziz is a columnist at the Lebanese newspaper Al-Akhbar, a contributor for Al-Monitor's Lebanon Pulse and the host of a weekly political talk show on OTV, a Lebanese television station. He teaches communications at the American University of Technology and the Université Saint-Esprit De Kaslik in Lebanon. On Twitter: @JeanAziz1

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