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Lebanese Oil And Gas: The Great Cover Up!

Oil companies are waiting for the Lebanese Cabinet to pass two decrees related to the model of licensing round and delineation of the offshore gas blocks. (Maersk). Lebanon will miss a golden opportunity to become a major gas producer, as Cyprus, Turkey and Israel prepare plans to drill for natural gas and export it to Europe and Egypt in 2020 or 2022 at the latest. CEOs of major oil companies, foreign energy experts and Cypriot officials have one question every time Lebanon’s name is mentioned in the oil and gas conferences in the island: “When will the Lebanese Cabinet pass the two decrees relating to the model of licensing round and delineation of the offshore gas blocks?” They remark that talk about Lebanon’s role in the future of gas production cannot begin unless the two bills are passed. Most Cypriot officials who talk passionately and relentlessly about the promising future of their island once oil companies start drilling in 2020 lament the fact that Lebanon lags behind most countries in the region in terms of awarding contracts to international oil companies. Gary Lakes, a Cyprus-based energy correspondent very familiar with Lebanon, blames the politicians for the delay in passing the two crucial decrees. “The Lebanese government and politicians have to shape up. They are depriving the Lebanese people of a lot of opportunities. It’s a shame because many companies have shown interest in Lebanon’s potential gas wealth,” Lakes told The Daily Star after a one-day conference on global energy debates and the East Mediterranean that was held in Nicosia.

But Lakes stressed that a lot of international oil companies are still interested in taking part in the licensing round of a competition to award tenders to drill for gas if the Lebanese government passes the two decrees. A “lot of important oil companies were prequalified in the first round and I am sure they will show the same interest once the two decrees are passed and the licensing round has been set. The seismic studies and data collected were very encouraging,” he added. The other issue Lebanon needs to sort out immediately is the row between Lebanon and Israel over a disputed maritime zone close the border of the countries, according to experts. A Cypriot official, who spoke on condition of anonymity, told The Daily Star that his government tried to mediate between Lebanon and Israel to solve this pending issue. “But the Lebanese side told us politely that a powerful country has decided to step in and help reach a solution. I think they were referring to the United States. If they can settle this issue then that is great news,” the official said.

A senior U.S. official told The Daily Star in July that Washington would continue its efforts to end the row between Lebanon and Israel over the maritime zone believed to contain large quantities of natural gas. “Based upon my ongoing discussions with both sides I believe that both Lebanon and Israel wish to resolve the dispute without unnecessary escalation, which is why I will continue to engage both sides on a mutually acceptable resolution,” U.S. Special Envoy and Coordinator for International Energy Affairs Amos Hochstein told The Daily Star in an email. The Lebanese government has proposed that the United Nations can authorize the demarcation of the disputed maritime zone with Israel to determine the boundaries of each country. But Israel has not given a clear answer to this proposal. Cypriot officials say that it is in their interests to see a final agreement reached between Lebanon and Israel, as this will be good news for the region and could speed up the delivery of gas through a pipeline.
Nikos Christodoulides, a spokesman of the Cypriot government and veteran politician, said that his country played a pivotal role in narrowing differences between some neighboring countries, citing the example of Palestine and Israel. He added that Lebanon and Cyprus have almost finalized free economic zone agreements, stressing that there is no maritime border dispute between the two countries. In November 2013, Cyprus and Lebanon agreed to start negotiations on a unitization agreement which would regulate who gets what in the event that hydrocarbons are found in the area between the two countries’ exclusive economic zones (EEZ). Former Energy and Water Minister Gebran Bassil reached the agreement during his visit to Cyprus. Cyprus has signed an EEZ agreement with Egypt, Israel and Lebanon, in an effort to clear the way for peaceful exploration of the hydrocarbons in its own economic zone, but the Lebanese Parliament has so far failed to ratify the agreement. Some analysts have suggested pressure from Turkey has helped delay ratification. Cyprus has also launched negotiations with Israel to sign a unitization agreement, governing what happens if a hydrocarbons reservoir crosses the median line between the two countries.

In 2014, Egyptian President Abdel-Fattah al-Sisi issued a presidential decree with which he approved the ratification of a framework agreement with Cyprus on the joint exploitation of hydrocarbon reserves. Experts stress that apart from the failure to pass the two decrees and inability to reach an agreement on the disputed maritime zone, Lebanon will have to devise a plan to find a route to export its gas if all hurdles are removed. These experts emphasize that Lebanon could be in a better position to export gas to Europe if the war ended in Syria. “If there is a political solution in Syria then Lebanon, with the help of other countries, can supply gas to Europe through a pipeline through Syria and Turkey. This may be cheaper and less time consuming than building a pipeline from Cyprus to Europe,” one expert explained.

By Osama Habib