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Old May 7th, 2011, 09:04 PM   #181
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May 7, 2011 - 09:50

Lebanon’s gas rights defended in Switzerland

by Frédéric Burnand, swissinfo.ch

With sizeable oil and gas reserves coming to light in the Eastern Mediterranean, a Swiss association is working to help Lebanon assert its exploitation rights.

Earlier this week representatives from across the Lebanese political spectrum came together at a meeting in Geneva organised by the Swiss Association for Euro-Arab-Muslim Dialogue (ASDEAM).

Considering the level of tension in the region – Israel is still technically at war with Lebanon – and the ultimate prize of self-sufficiency in energy provision, the battle over these resources promises to be tough. Disputed maritime borders and sea rights will also muddy the waters.

The region has recently seen some of the largest natural gas discoveries of the past decade, Paris-based oil and gas expert Nicolas Sarkis explains.

“These finds are situated in a zone which is called the Syrian arc, which goes from Egypt, across the Sinai to Syria passing by Israel, Gaza and Lebanon. There are also significant indications of gas from the north of Syria as far as Turkey,”

Sarkis adds: “The reserves around Haifa [northern Israel] appear to be relatively large [238 billion cubic metres] according to initial findings on the Israeli side.

“But these fields quite likely spread into Lebanon’s sovereign territory. However Israel is the country the most advanced on the legal side and in the preparation to exploit this gas. Lebanon is playing catch-up.”

Which is why ASDEAM has offered its services to Lebanon to help brush up its legal dossier.

Lebanese unity

This is not the first time ASDEAM has worked towards Lebanese unity and cooperation. In 2007 it organised a series of meetings with the support of the Swiss foreign ministry, which concluded with a common declaration opening the way for the appointment of a Lebanese president.

Based on these existing contacts, the Geneva-based association once again brought together representatives from across the Lebanese religious and political spectrum, along with legal experts on May 2 and 3 in a Geneva hotel.

“Lebanon needs to put together a dossier and a legal team capable of defending the interests of the country in a difficult regional context,” Yves Besson, vice president of ASDEAM, told swissinfo.ch.

“It seemed worthwhile for us to bring together Lebanese representatives and international experts on maritime law. And to define a plan which will again allow the Lebanese government – when it is formed – to assert its rights to these gas reserves, whether it is with Israel, Syria or Cyprus,” he said.

Besson gave some details of the Lebanese party, which included those close to leading politicians.

“Around the table we had representatives of the Lebanese ministers concerned, technicians and lawyers, representatives of the government which is expediting matters, someone close to the Lebanese presidency and an adviser to the prime minister designate. In other words, all the parties in the Lebanese political arena were represented.”

“What was great was that all the Lebanese present seemed to be determined to defend the interests of Lebanon. And the calibre of the people present was sufficiently high to give weight to that determination,” Besson added.

Swiss interest

According to the former diplomat, the Swiss foreign ministry is not directly involved. “But it is informed and has shown its interest by paying a visit in the course of this meeting.”

The Swiss commitment was confirmed by a source close to the matter who added that Switzerland is politically supporting the process.

Lebanon’s chances of success are severely hampered by political division. “Between the different Lebanese parties, relations remain very tense. Even at governmental level, it has been months since Lebanon has been able to form a government. It is not going to be easy to defend a common position on such a complex dossier,” Sarkis observed.

The oil expert also pointed to the wider regional obstacles: “Lebanon and Israel are technically at war. On top of that, if it is confirmed that the Israeli gas reserves are very large that would not suit the interests of certain countries like Iran, which has significant gas reserves.”

Besson knows the context well. “Neighboring countries were not mentioned at all at our meeting. And the Lebanese spoke with one voice,” he said.

“Our goal was to define a zone of interest on which the Lebanese could reach agreement. We emphasised that despite the absence of government they should defend the interests of the country without delay. From this point of view our meeting was a success.”

But time is of the essence. As soon as a reserve begins to be exploited – Israel is talking about 2013 – the issue will rise to the surface, involving the entire international community.

Frédéric Burnand, swissinfo.ch
(Translated from French by Clare O'Dea)
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Old May 27th, 2011, 05:50 AM   #182
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Bassil calls for rehabilitation of obsolete oil refineries
May 27, 2011 02:09 AM (Last updated: May 27, 2011 02:13 AM)
By Mohammed Zaatari
The Daily Star

ZAHRANI, Lebanon: Caretaker Energy and Water Resources minister said Thursday that Lebanon had all the needed capabilities for oil storage, promising to rehabilitate the two obsolete oil refineries in the country.

“We are pretty sure that we have the needed capabilities which enable Lebanon to store oil in the two strategic facilities which we have in Tripoli in the north and in Zahrani in the south,” caretaker Minister Gibran Bassil told reporters after touring the oil facilities of Zahrani.
Bassil vowed that the ministry would start renovation works in the Zahrani Facilities once the refurbishment of Tripoli’s structure is over.

“This will restore the stature of the Zahrani facilities in terms of storage, refining and transit,” Bassil added.

Bassil lashed out at violations on lands belonging to Zahrani structure. “I cannot understand how a private company takes 17,000 square meters inside the facilities based on a legal justification and I cannot understand how we cannot renovate some storage tanks.”

Meanwhile, Bassil cited progress in the issue of offshore oil drilling. “I have received a number of proposals and serious offers for offshore oil drilling, the last if which was last week,” he said.

Bassil noted that some companies have offered extracting oil within one or two years, dismissing reports that the process needed seven or 10 years.


The oil facilities of Tripoli and Zahrani, to which oil used to be pumped from Iraq and Saudi Arabia respectively, have been abandoned for several decades.
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Old July 3rd, 2011, 03:45 AM   #183
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Bassil: 85 international companies to participate in the first international Lebanese conference to explore petroleum resources in land and sea
BEIRUT | iloubnan.info / NNA - July 02, 2011

Energy and Water Minister Gebran Bassil revealed Saturday during a fieldtrip to Lebanon's geological sites that 85 international companies will participate in the first international Lebanese conference to explore petroleum resources in land and sea.

This massive participation indicated international interest in Lebanon's natural gas and petroleum resources in both land and sea, the Minister said.

Bassil took over a hundred international experts from various big companies on a geological trip across Lebanon, particularly in Qartaba, Arz Tannourine, Daher Qadeeb, Shekka and Jbeil among other locations. He confirmed that prompt and serious action will be taken simultaneously in the search for petroleum in Lebanese waters as well as Lebanese lands.
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Old July 8th, 2011, 03:27 PM   #184
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Lebanon to search for natural gas in Israeli waters

Cabinet will to try to preempt the move on Sunday.
By Avi Bar-Eli

s to parcel out the rights to search for natural gas and oil in the area, which may also include part of Israel's exclusive economic zone, according to information obtained by the Israeli government.

As a result, the cabinet will be asked to approve an official decision on Sunday detailing the borders of Israel's exclusive economic zone. This decision will be submitted to international institutions, including the United Nations, in response to a similar decision submitted by Lebanon six months ago. Lebanon told the UN at the time that it controlled areas included in Israel's exclusive economic zone.



"A lack of an Israeli response to the Lebanese machinations could be interpreted by legal bodies as tacit consent," the cabinet resolution states. Israel and Lebanon have never agreed on their maritime border; hence the need for an official statement detailing Israel's claim.

The law of the sea defines an exclusive economic zone as an area in which a state has special rights over the exploration and use of marine resources. It stretches from the seaward edge of the state's territory to 200 nautical miles from its coast. In casual usage, the term may also include a country's territorial waters and even the continental shelf beyond the 200-mile limit. If there is more than one country with rights inside the 200-mile zone, the issue is supposed to be resolved through a procedure similar to arbitration in the UN.

But the exclusive economic zone usually applies to what is in the sea, such as fish, and not to what lies under the continental shelf. Thus problems may arise when a continental shelf is shared by more than one country, such as can occur in the Mediterranean.

In December 2010, Israel and Cyprus signed an agreement officially delineating the maritime border between them. But the border between Israel and Lebanon has never been agreed upon, and in practice, Lebanon has in the past made its own determination by selling off exploration franchises.

Lebanon did reach an agreement on the boundaries of its exclusive economic zone with Cyprus, but it never ratified the agreement - and now it is claiming the boundary runs further south than specified in that agreement.

Israel has tried to keep a low profile on the matter of its maritime borders with Lebanon. A year ago, however, National Infrastructure Minister Uzi Landau warned Beirut that Israel would not hesitate to use force to protect its natural gas fields.
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Old July 13th, 2011, 01:50 PM   #185
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Points of contention
Matt Nash, July 13, 2011


A map showing three areas where the Norwegian company Petroleum Geo-services conducted surveys looking for potential oil or gas deposits off Lebanon’s coast. (PGS/NOW Lebanon)

Lebanon is hoping the UN will help it demarcate its maritime boundary with Israel, a plan that could stall as the Jewish state would also have to request mediation from the world body. For years now Beirut has been trying to establish what is known as an exclusive economic zone (EEZ), an important step toward exploiting the oil and natural gas reserves that likely lie off its coast.

There is significant evidence that large deposits of oil and natural gas lie off the coasts of Lebanon, Syria, Cyprus and Israel. This year, Lebanon conducted another round of surveys to search for potential deposits, while in August of last year it approved a law to explore for, and exploit, undersea resources, although this law has not yet been fully implemented.

Establishing an EEZ, particularly in the tightly-packed Eastern Mediterranean, requires agreement among neighboring states, according to the 1982 UN Convention on the Law of the Sea (UNCLOS). Under UNCLOS, a state is entitled to claim rights to exploit the sea (and anything buried below) up to 200 nautical miles (around 370 kilometers) from its shore. Where EEZs overlap (or when two states are along the same coast), states are required to negotiate treaties to define the boundaries of their respective EEZs.

Normally, when disputes arise, states that are signatories of UNCLOS, which Israel is not, can take their cases to a special tribunal established by the convention. Failing that, they can appeal to the International Court of Justice or seek third-party mediation. According to legal experts, the UN can intervene if both states call on it to.

At issue now between Lebanon and Israel is where their maritime borders should be fixed. Along the coast, the countries more or less agree where the line should start, but out in the Mediterranean, there is serious bickering. Lebanon wants to use Point 23 (see graphic) as the border’s southern limit, whereas Israel wants to use Point 1, several kilometers north of Point 23.

Lebanon, however, finds itself in a bit of a quandary. In 2007, Lebanon inked a deal with Cyprus on their mutual maritime boundaries. In that agreement, which was never ratified by Lebanon’s parliament and is therefore not in force, the two countries decided that the southern limit of the maritime border should be Point 1.

Mohammad Kabbani, head of parliament’s Public Works and Energy Committee, told NOW Lebanon that using Point 1 was a mistake. The agreement with Cyprus, he said, was supposed to be written in a way that left Lebanon’s southern boundary open for negotiation. Lebanon’s parliament never ratified the agreement for fear of angering Turkey, which occupies part of Cyprus and does not think the Cypriot government has the right to be negotiating such deals.

With the Cyprus agreement shelved, in both July and October 2010, Lebanon sent maps and coordinates to the UN (in line with UNCLOS) stating that the southern limit of its EEZ is Point 23.

If one were to draw a straight line from Point 23 to Lebanon, one would arrive south of Saida. If one were to draw a straight line from Point 1, one would arrive north of Saida. (EEZ boundaries follow the curvature of the earth and almost never extend in a straight line from a state’s border along the coast.)

A map that shows areas that Israel gave companies licenses to explore seems to put the northernmost tip of the licensed area in line with Point 23. It appears Lebanon’s 2010 submissions to the UN basically follow the line created by Israel when the latter handed out exploration rights.

Kabbani dismissed the idea that Lebanon sought to use the “facts on the ground” created by Israeli licensing to set the border. He maintains that Point 23 is the proper point to use, and added that a group of experts are still working with Lebanese authorities to finalize the boundary. Kabbani said there is some talk of the border possibly being still further south of Point 23.

Israel, for its part, signed an agreement with Cyprus in December 2010 defining their undersea borders, using Point 1 as the northernmost limit of Israel’s EEZ. The countries ratified the agreement, and it went into force in February 2011. Lebanon soon cried foul, and in June 2011, Foreign Minister Adnan Mansour sent a letter to the UN calling the Israel-Cyprus agreement into question:

“Point 1 does not therefore represent the southern end of the median between the Lebanese Republic and the Republic of Cyprus that separates the exclusive economic zones of each country, and can only be viewed as a point that is shared by Lebanon and Cyprus. It is not a terminal point and therefore may not be taken as a starting point between Cyprus and any other country,” the letter said.

Today Israel is holding fast to Point 1 as the basis of a border, pointing to Lebanon’s agreement with Cyprus.

Speaking July 10 before Israel’s parliament, which convened to approve of the country’s EEZ boundary, Prime Minister Benjamin Netanyahu said, “The lines declared by Lebanon contradict both the maritime border agreement signed by Israel and Cyprus, as well as the border agreement signed between Lebanon itself and Cyprus.”

It is unclear if Israel is willing to call on the UN to mediate, but resolving the dispute (and fully implementing the oil and gas law) is crucial for Lebanon to be able to attract international companies willing to invest billions to explore for, and potentially exploit, resources under the sea off Lebanon’s coast.

The Israeli daily Haaretz reported on July 10 that Fredrick Hof, an American diplomat, was mediating between the two countries and that the US had “endorsed” Lebanon’s claim.

Speaking on background, a US Embassy spokesman denied that the US endorsed either side’s claims but refused to comment on what role, if any, Hof was playing in the EEZ dispute.

However, the spokesman added, “[Hof]’s involved in peace issues and that includes Lebanon and Israel.”



http://www.nowlebanon.com/NewsArticl...40&MID=0&PID=0
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Old July 23rd, 2011, 12:31 AM   #186
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Old August 3rd, 2011, 12:40 PM   #187
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What lies beneath

Matt Nash, August 3, 2011




Parliament is expected to pass a law delimitating the boundaries of Lebanon’s exclusive economic zone (EEZ) during a two-day session beginning Wednesday. That law will become the basis for negotiations with neighboring countries as Lebanon stakes a claim to the oil and gas resources believed to be buried beneath the Mediterranean.

While the law is an important step for undersea drilling based on the UN Convention on the Law of the Sea (UNCLOS), which loosely governs maritime resource use, Lebanon is still a long way from tapping what might be off its coast. In some ways, Lebanon put the cart before the horse in approaching its potential off-shore resources.

Typically, based on UNCLOS, a country will first pass an EEZ law, submit it to the UN, and then work out treaties with any neighbors that might have competing claims. A state can claim an EEZ up to 200 nautical miles (370 km) off its coast and negotiates with any other countries that have overlapping EEZs. Treaties concerning EEZs are also submitted to the UN. According to UNCLOS, the UN is basically a repository of information concerning maritime resource issues.

The UN does not, however, act as a mediator in disputes. Lebanon has to negotiate treaties with Israel and Syria concerning EEZ borders and, according to MP Mohammad Kabbani, who is head of parliament’s Public Works and Energy Committee, it will re-negotiate a 2007 agreement with Cyprus that Lebanon’s parliament never ratified. Obviously, the negotiations with Israel are thorniest for Lebanon, and the country has consistently called on the UN to step in.

For the world body to do so, both countries have to ask, which Israel has thus far refused to do. In fact, speaking after a recent UN Security Council meeting, UN Special Representative for Lebanon Michael Williams said that given the fact that Lebanon and Israel have no diplomatic relations, “it’s difficult for the UN to find a way forward here.”

Hezbollah and its allies, in recent weeks, have been firing off warnings toward Israel not to “steal” Lebanon’s resources, all but directly threatening war. While the two countries dispute an area around 280 square kilometers in size with untold resources below, it is not absolutely necessary for Lebanon to define its borders before it starts drilling.

Israel itself, for example, only approved an EEZ law in late July (and has not actually even signed UNCLOS), but has been extracting resources from the sea for years. Maritime disputes are common the world over, and countries often drill in coastal waters that are indisputably theirs. In Lebanon’s case, areas that have been subject to 3D mapping (an early exploration-related step taken before drilling) are almost exclusively in undisputed Lebanese waters.

The three separate 2D and 3D studies done off Lebanon’s coast in recent years suggest there is oil and gas out there. Further, according to a March 2010 study by the US Geological Survey, the Levant basin, which falls within the EEZs of Lebanon, Cyprus and Israel, holds an estimated 1.689 million barrels of oil and 122.378 billion cubic feet of natural gas. Based on current prices, those reserves are worth trillions.

To move forward, however, Lebanon still has a lot to do. In August 2010, parliament passed an oil and gas law that defines the process for carrying out an environmental impact study before any work begins as well as laying out the bidding process for bringing in companies to explore for and eventually extract any resources.

The law also calls for establishing a Petroleum Administration and a special fund, similar to one Norway has, where revenues would be saved for investment. According to MP Kabbani, there are still “many decrees” that cabinet and parliament have to draft and approve before progress can happen.

Kabbani did, however, say that several companies (he did not have an exact figure) have expressed interest in drilling near Lebanon and have purchased the results of the previously-conducted seismic studies. The law says that any resource extraction has to be done by three companies who come together in a joint venture, which is also a common global practice for off-shore drilling.

He denied media reports that Energy Minister Gebran Bassil inked a deal with Russia (which has very little experience in off-shore drilling in the first place) to drill and said he had little information on a memorandum of understanding Beirut signed with Tehran on sharing expertise in undersea resource exploration in late July. The Ministry of Energy did not respond to interview requests.

Another challenge ahead remains creating an atmosphere of stability and confidence to bring in exploration and drilling companies. So while the dispute with Israel is garnering all the headlines, it is just one of the obstacles standing between Beirut and a windfall in resource revenues.
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Old August 3rd, 2011, 12:52 PM   #188
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I don't see why there should be any disputes here,why don't the UN just settle this down??
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Old August 3rd, 2011, 04:24 PM   #189
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Because:

Quote:
For the world body to do so, both countries have to ask, which Israel has thus far refused to do. In fact, speaking after a recent UN Security Council meeting, UN Special Representative for Lebanon Michael Williams said that given the fact that Lebanon and Israel have no diplomatic relations, “it’s difficult for the UN to find a way forward here.”
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Old August 30th, 2011, 12:27 AM   #190
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British, Lebanese consortium targets Lebanon gas drilling rights
August 29, 2011 12:19 PM (Last updated: August 29, 2011 12:41 PM)
The Daily Star

BEIRUT: UK-based oil firm Cairn Energy has formed a consortium, including the Beirut-based CCC, a Lebanese private construction firm, to bid for the rights to drill for gas and oil off the coast of Lebanon, its chief executive said.

The company said it planned to participate in a licensing round in Lebanon due to take place next year, where Cairn's success would add acreage in a politically-sensitive part of the world.

Lebanon and Israel do not agree on their maritime border and remain in a formal state of war, but CEO Simon Thomson, who took over from Cairn's founder Bill Gammell in June, shrugged off concerns about the region.

"In relationship to potential boundary disputes, I think that's a fairly common thing around the world. Obviously we will assess, as we do anywhere, the political, technical, commercial risks in whatever we do, but there's nothing that's stopping us being interested in this licensing round," he said.

Cairn is no stranger to controversy - its current exploration program off the coast of Greenland has attracted criticism from environmental groups who argue that an oil spill in the remote Arctic would be difficult to clean up.

Part of the cash returned from the Indian transaction could be used to fund drilling in Lebanon, where Cairn said it has teamed up with a unit of CCC, a Lebanese private construction company, and U.K.-based explorer Cove Energy.

The company said it had cash of around $1 billion on June 30 and its balance sheet would be strong enough not to require it to further reduce its stake in its Indian business to fund any drilling in Lebanon.

"We're very comfortable with our position in India. We have the flexibility and strength in our current balance sheet not to have to contemplate any [further] sales in India," Thomson said.

Thomson said the firm would only move into Lebanon, where the company anticipates a competitive bidding process after Noble Energy and its Israeli partners made a large gas discovery in nearby waters, if the commercial terms suited.

The U.S. Geological Survey (USGS) last year estimated that the Levant Basin Province lying mostly off the coast of Israel, Lebanon and Cyprus could hold 122 trillion cubic feet of recoverable gas, making it one of the world's richest deposits. – With Reuters
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Old October 4th, 2011, 05:41 AM   #191
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Lebanon will benefit from oil and gas discovery
January 05, 2011 12:00 AM
By Osama Habib
The Daily Star

Editor’s note: The Daily Star talks to energy expert Roudi Baroudi regarding the prospect of tapping the energy resources off Lebanon’s coast, as well as the benefits, risks and challenges involved in such an endeavor.

Q. What, in your view, are the risks in Lebanon moving ahead with its oil and gas potential?

A: The real risks stem not from action but rather from inaction because Lebanon is still putting its energy house in order. Thanks to Parliament Speaker Nabih Berri, who is always a staunch defender of Lebanon’s vital energy interests, in 2010 we enacted a key piece of legislation, one of several milestones Lebanon has needed since 2000.

Now, to diminish any tensions or risks Lebanon could face, the government will have to follow up with the U.N. under the U.N. Convention on the Law of the Sea (Unclos), to which the E.U. has adhered, for the delineation of Lebanon’s offshore exclusive economic zone. Cyprus already has delineation deals with Israel and Egypt, and its pact with Lebanon awaits ratification by Parliament. Relying on Unclos will highlight Lebanon’s rights and responsibilities relating to our natural marine resources in what is officially known as the Levant Basin Province; specifically, it will define Lebanon’s rights to exploration and drilling activities. This will leave Lebanon with properly demarcated borders, leaving no contention, especially in our patch of the Eastern Mediterranean.

Q. What is the role of the United Nations? Is it true that UNIFIL should have an active role in this field?

A: One way or the other, Lebanon has to use U.N. mechanisms, including the Unclos pact and filing a complaint at the U.N. Security Council. Unifil was created in 1978 by a Security Council resolution that was also supposed to confirm the withdrawal of the Israeli occupation forces from Lebanon. After the 2006 war, a maritime task force was added to Unifil’s role to prevent seaborne illegal arm shipments, but right now I don’t believe the force and its dozen or so vessels have a mandate to protect any hydrocarbon reserves off Lebanon’s coast.

Whatever the eventual case, given that the economic stakes are so high, Lebanon has to continue to define its territorial sea and contiguous border through Unclos, which we have been party to since 1995, but which Israel has not yet joined. Diplomacy offers the most logical solutions for any potential problems in this area, and we should exhaust this option before considering any other options.

Q. What if it turns out that the Leviathan Gas Field lies within both Lebanon and Israel’s offshore economic zones?

A: It looks like this huge field could well straddle our maritime borders with Israel – and possibly Cyprus too. Disputes over oil and gas fields are not new, they exist all around the globe, and there will be more disputes to come. For example, Argentina has gone to the United Nations to defend its rights over Britain’s drilling off the Falkland Islands. A dispute recently arose between Iran and Iraq over a small oil field near the southern portion of their shared border. China and Japan are also at odds over an East China Sea gas field. And an oil-rich region in South Sudan is seeing the same kind of political feuding with the central government in Khartoum.

The most important step was when Berri came out and said we should move forward by following up on our hydrocarbon act, enact the relevant downstream laws, invite international oil and gas firms, establish a national oil company, and develop a coherent government energy policy. He was right. This is the only way we can achieve the right fiscal and regulatory environment, and start tendering for blocks in offshore areas not subject to dispute, not to mention some of our onshore prospects as well.

Parallel to these efforts, we should also use every diplomatic tool at our disposal, assisted by our major allies in the Arab world, in Europe, and even the United States to define our maritime boundary and to force the Israelis to respect UNCLOS, even if they aren’t members of it.

Q. What about Israeli advantages?

A: You have to be objective here; the Israelis have had a head-start in their hydrocarbon geology and assessment. Their drilling and exploration activities started in the early 1960s, becoming even more active in the 1970s, to the point where their offshore seismic exploration and other testing has already covered 450 wells. When Lebanon should have been catching up, especially when this most lucrative of commodities could be a veritable savior for the national economy, it became mired in a civil war that ended only in 1990, and has spent much of the time since mired in unfortunate political skirmishing. Nonetheless, with the right policies that create incentives and a transparent business environment, there is no reason why we can’t start making up for lost time in short order.

Q. What are in your views the benefits to Lebanon?

A: The economic benefits to Lebanon would be in a typical evolution process; first, once all the fiscal, legal and business environment parameters are defined, Lebanon will first benefit from being able to go ahead with an international licensing round and the boost of its infrastructures. This could be in a typical exploration; drilling and production process could vary between $1-1.5 billion.

The second evolution process would tackle the international service companies which through their foreign direct investments, could reach between $200-250 million for each exploration block they are working on.

Finally, once you reach the production level, if we consider the productive life of some of the fields that have been prospected is in the range of 20-25 years each. Today’s average oil price is quoted around $92/barrel, considering our basin/fields have a potential reserve of 85,000-88,000 of T.O.E. (Tons of Oil Equivalent), we should consider that the treasury should attain an income $3-$3.5 billion a year for the next 20-25 years.

The benefits to Lebanon go beyond the fiscal. It will meet all Lebanon’s local energy demand and will insulate the country from volatile energy prices.

Q. What would you recommend in this regard?

A: Lebanon’s onshore and offshore provinces are definitely positive economic factors to Lebanon’s economic development. I still strongly believe that Lebanon needs political consensus to bring serious thinking on Lebanon energy security and to ensure the appropriate production of our hydrocarbon wealth. Dialogue and diplomacy should protect any future disputes and attract enough capital from international oil and gas companies for this massive program implementation.

Roudi Baroudi is energy and privatization expert. He could be reached at roudi.baroudi@yahoo.com
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Old October 18th, 2011, 03:19 AM   #192
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Excerpt from todays Dailystar:

Separately, the Cabinet is moving forward with plans to exploit the country’s potential maritime resources, promising to issue all decrees related to a law authorizing oil and gas exploration off the coast before the end of the year.

The move, along with similar decisions, was made unanimously Monday during a meeting of Parliament’s joint committees chaired by Speaker Nabih Berri and attended by Prime Minister Najib Mikati. During the meeting, MPs were briefed by the Cabinet on steps to extract offshore oil and gas. Energy and Water Resources Minister Jibran Bassil was also among the attendees.

“Decrees [to implement the law] will be issued and the committee to manage the oil sector will be formed as stipulated by the law before the end of this year,” Beirut MP Mohammad Qabbani, who chairs Parliament’s Public Works, Transport, Energy and Water committee, told reporters following the session. Participants in the meeting were adamant that the 860 square km. area claimed by Israel is fully within Lebanese maritime borders.

“There is consensus that we will not consider the 860 square km. zone an area disputed by Lebanon and the enemy [Israel],” Qabbani said. “We consider it to be fully within Lebanese maritime zone and we insist on awarding contracts to companies to explore [oil] there as well.”

In Aug. 2010, Parliament passed a law allowing oil and gas exploration off the Lebanese coast following the discovery of two gas fields near the northern Israeli city of Haifa.

Qabbani said that license preparations to companies interested in carrying out offshore gas and oil exploration would begin early 2012.

Foreign Affairs Minister Adnan Mansour will travel to Cyprus within 10 days to resume discussions on adjusting the borders of Lebanon’s Exclusive Economic Zone and prepare an agreement based on which the two states will share oil resources.

At the same time, negotiations will begin with Syria to demarcate maritime borders between the two countries, Qabbani added.

In Jan. 2007, Lebanon and Cyprus signed a bilateral agreement delineating the EEZ between the two countries. The edges of the zones were marked by six coordinates judged to be equidistant between the two countries.

But in December of last year, Israel and Cyprus signed their own EEZ agreement. Lebanon argues that under its agreement, Israel infringes on 860 square km of its EEZ.

[It was agreed] that the [the government] will start [exploring] for oil on land as well and we hope that the results will be promising,” Qabanni said. “There is information about the presence of seven wells. Two were drilled in the 1960’s: one in the [Bekaa town of] Qaa and the other in Tal Znub. These will be given priority.”

A meeting similar to Monday’s will be held before year’s end, said Qabbani.
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Old December 7th, 2011, 07:33 PM   #193
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Bassil: ‘Encouraging’ preliminary results regarding offshore gas
December 7, 2011

Energy Minister Gebran Bassil said on Wednesday that preliminary results regarding the presence of gas in Lebanese waters “have been very encouraging.”

He added that the initial results “allow us to move on to a new stage which would help us collecting more precise and verified data” regarding offshore gas before the exploration and drilling phase.

Bassil was speaking to reporters following a meeting with a representative of Armada Energy and after inking a contract with Beicip Franlab, which is an International Oil and Gas Consulting and Software Solutions Provider.

The Lebanese Parliament in August 2010 passed an oil exploration bill, which calls for the establishment of a treasury and a committee to oversee exploration and drilling off the coast of Lebanon.

-NOW Lebanon
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Old December 21st, 2011, 10:00 PM   #194
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Bassil signs agreement with PGS
December 21, 2011 share


Energy Minister Gebran Bassil signed on Wednesday an agreement with the Norwegian Petroleum Geo-Services (PGS) company to carry out seismic surveys in the Lebanese economic exclusive zone, the National News Agency reported.

The agreement aim to survey for the presence of petroleum in Lebanese waters, according to the report.

PGS helps oil companies to find oil and gas reserves offshore worldwide.

The Lebanese Parliament in August 2010 passed an oil exploration bill, which calls for the establishment of a treasury and a committee to oversee exploration and drilling off the coast of Lebanon.

-NOW Lebanon
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Old January 5th, 2012, 05:58 AM   #195
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Cabinet approves oil-exploration decree
January 4, 2012


The cabinet convened on Wednesday approved a decree that enacts offshore oil exploration projects, including the formation of a committee to oversee the issue.

“The cabinet decided to pass the proposal related to the management of the oil committee,” Social Affairs Minister Wael Abu Faour told the press following the ministerial meeting at Beirut’s Grand Serail.

The minister added that the cabinet agreed to amend certain laws, including ones related to the management of civil aviation.

Abu Faour also quoted Prime Minister Najib Mikati as telling the ministers that there needs to be “solidarity in the government in order to face challenges.”

The Lebanese Parliament in August 2010 passed an oil exploration bill, which calls for the establishment of a treasury and a committee to oversee exploration and drilling off Lebanon’s coast.

-NOW Lebanon
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Old January 6th, 2012, 02:12 AM   #196
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Lebanon aims for gas drilling tenders within 3 mths
January 05, 2012 01:42 PM
Reuters

BEIRUT: Lebanon will issue international tenders for drilling in its potentially gas-rich Mediterranean waters and aims to have contracts signed with the winning firms within a year, its Minister of Energy said on Thursday.

Interest in drilling off Mediterranean coasts has grown since two natural gas fields were discovered off the coast of Israel, Lebanon's southern neighbor. Estimates value those reserves at tens of billions of dollars.

Lebanon has yet to explore off its own coast but on Wednesday its cabinet approved plans to implement a law on drilling that would pave the way for international tenders.

"Launching the international tenders can and should be completed in the next three months and we will make a big effort to do this," Gibran Basil told Reuters by telephone.

"The last step will be signing the first contract which we will do in the next year or less."

Basil said the cabinet's approval of the ministry's plans would allow it to appoint a committee to oversee drilling and exploration. The committee should be appointed within a month, he said.

The minister shrugged off concerns over potential drilling delays due to a maritime border conflict with Israel.

The two countries, which remain formally at war, are disputing an 850-square-km stretch of sea off their coast that lies near an area where U.S. and Israeli firms discovered the two massive natural gas fields.

"Our petroleum resources are not limited to this area and this issue will not stop us in anyway from progressing on the drilling issue," the energy minister said.

"If Israel thinks it can delay us with this plan, no, that is a completely separate problem and we are not cornered."

United Nations officials said the two countries were working to avoid conflict. But Lebanon's powerful Hezbollah, a Shi'ite Muslim political party and militant group that fought a war with Israel in 2006, have warned they will defend the country's natural resources.

Basil said American, European, Asian and African firms had all signaled interest in drilling off Lebanese shores.

"All the big international companies have not only shown an interest but have participated in conferences that we held and bought the information we have," he said.

"Their involvement hasn't stopped just at words, they have begun to pay money."
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Old January 6th, 2012, 02:20 AM   #197
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Lebanon may tap gas wealth in 2012
January 06, 2012 02:06 AM
By Osama Habib
The Daily Star

?BEIRUT: Lebanon is sitting on one of the biggest gas reserves in the region and drilling is likely to start as early as this year, a leading expert said Thursday.

“I am very happy that [the] Lebanese government passed the law to administer the country’s oil and gas wealth off the coast. This is a major step that will make Lebanon one of the largest gas producers in the region,” Roudi Baroudi, a leading energy expert, told The Daily Star.

He added that the 11th basin off the Lebanese coast is reported to have a gas reserve which are almost three times bigger than Libya’s gas reserve.

Energy and Water Minister Jibran Bassil, who lobbied hard to pass the law in the Cabinet, was upbeat about the future of the oil wealth in Lebanon, stressing that drilling can start in three months, once the tender is complete.

The Cabinet endorsed the long awaited oil and gas decrees Wednesday after a prolonged and heated debate over who should administer the tender and oil and gas exploration off the Lebanese coast.

The news about the imminent oil exploration may be one of the few items of good news in a country plagued with numerous security and economic problems.

In principle, the government should name a body which will administer the entire oil and gas exploration process.

The individuals who will serve in this body should be named within one month or less, although some quarters fear political bickering over the appointments will ensue.

Baroudi insists Lebanon can legally start oil and gas drilling within the undisputed Lebanese offshore territorial borders.

Lebanon is engaged in an ongoing debate with Cyprus, Turkey and Israel over the demarcation of offshore borders for its Exclusive Economic Zone.

According to Lebanese energy experts, Lebanon’s EEZ stretches some 12 nautical miles out to sea.

Baroudi stressed that companies can start drilling for oil and gas in an area 20,000 square kilometers large off the Lebanese coast.

“This area offers a variety of an unexplored hydrocarbon. We are talking about billions of dollars worth of gas,” he added.

Baroudi revealed that the 11th basin contains 1.9 billion barrels of untapped oil and 122 trillion cubic feet of natural gas.

The 11th basin stretches the entire length of Lebanon.

“Once we find the oil and have wealth this will be considered as money in the treasury. The second important step is the issue of the sovereign wealth fund which should, in my opinion, be under the jurisdiction of the Central Bank in case the government fails to name people for this committee,” Baroudi said.

However, it seems highly unlikely that politicians will reach an agreement on the names for the sovereign wealth fund.

All seismic 3-D surveys that were carried out by European and U.S. companies in the past few years proved that Lebanon has significant oil and gas wealth off the coast.

Bassil also commented on tenders during an interview with Reuters.

“Launching the international tenders can and should be completed in the next three months and we will make a big effort to do this,” Bassil said. “The last step will be signing the first contract which we will do in the next year or less.”

Bassil said the Cabinet’s approval of the ministry’s plans would allow it to appoint a committee to oversee drilling and exploration. The committee should be appointed within a month, he said.

The minister shrugged off concerns over potential drilling delays due to a maritime border conflict with Israel.

The two countries, which remain formally at war, are disputing an 850-square-km stretch of sea off their coast that lies near an area where U.S. and Israeli firms discovered the two massive natural gas fields.

“Our petroleum resources are not limited to this area and this issue will not stop us in any way from progressing on the drilling issue,” the energy minister said.

“If Israel thinks it can delay us with this plan, no, that is a completely separate problem and we are not cornered.”

United Nations officials said the two countries were working to avoid conflict. But Lebanon’s powerful Hezbollah group that fought a war with Israel in 2006, have warned they will defend the country’s natural resources.
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Old February 7th, 2012, 10:24 PM   #198
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Cure or curse?


By Zak Brophy on February 06, 2012

The conundrum of Lebanon’s hypothetical hydrocarbons

There’s nothing like the promise of untold wealth to wash away the winter blues, and as the nation awoke to a new year of crippling debt, power cuts, falling buildings and gloomy economic forecasts, it was in need of some good news. What better palliative then, than the prospect of opening a hydrocarbon jackpot under the Lebanese ocean floor?

In the wake of its neighbors’ success in tapping the Eastern Mediterranean’s resources, Lebanon is finally pushing forward efforts to exploit its share of the seabed in search of the spoils of oil and gas. While politicians may promise immeasurable riches for one and all to share, the sage among the crowd will be observing developments with more than a hint of healthy cynicism. What lies trapped underground offshore is far from assured and a bountiful find could easily turn from a blessing to a curse for the country’s economy and body politic.

The potential stakes

In its first meeting of the year on January 4, the Council of Ministers passed an implementation decree pertaining to Lebanon’s Offshore Petroleum Resources Law (Law 132), which will enable the country to move forward into the exploration stage. The move has been a long time coming and was precipitated by the enviable finds in other areas of the Eastern Mediterranean.

“Of course there is a race to explore and drill because Israel and Cyprus are already ahead of us,” explains the Acting President of the Lebanese Economics Association (LEA) and Associate Professor of Economics at the American University of Beirut (AUB), Jad Chaaban.

Research has long hinted at the potential for hydrocarbons in the region’s waters, with a 2010 report by the United States Geological Survey estimating an average of 1.7 billion barrels of recoverable oil and 3.5 trillion cubic meters of recoverable gas in the Levant Basin Province, a geological formation in the Eastern Mediterranean extending from Syria to the Sinai.

Whilst Lebanon lags behind in terms of exploration and drilling, it has commissioned a number of the rather coarse two-dimensional and more refined three-dimensional seismic surveys from the firms Geco-Prakla, Spectrum Geo and most recently Petroleum Geo-Services (PGS). The findings indicate a number of unexplored potential hydrocarbon hotspots including the Syrian Arc, the Levant Basin Province and the Levant Margin in the 20,000 square kilometers of deep water in Lebanon’s Exclusive Economic Zone (EEZ) — the ocean area the country can claim ownership over with regards to resources from oil to oysters.

Houston-based Nobel Energy has been operating in Israeli waters since 1998 and has tapped into two massive fields in recent years. In 2009, Tamar, a 237 billion cubic meters (BCM) gross natural gas field, was successfully drilled and an additional 453 BCM of natural gas were discovered in the Leviathan field in late 2010 — the world’s largest deep water gas discovery in the last 10 years. With successful drilling in December 2011 into what could amount to 226 BCM of natural gas in the Aphrodite field in Cyprus’ maritime waters, the Eastern Mediterranean has very much aroused the attention of international oil companies (IOCs).

Hype vs. reality

Opposition Member of Parliament (MP) and Head of the Parliamentary Energy and Public Works Committee, Mohammad Qabbani, expresses an optimism shared by many when he says, “There is oil and gas five kilometers south of our borders — do we think God created a wall between us and Palestine? All of this area is rich in the Levantine basis.”

However, successful drills in Israeli and Cypriot waters are no assurance that there is actually any commercially recoverable gas or oil in Lebanese waters. AUB’s Chaaban is skeptical about the hype surrounding the industry and argues, “They are being too optimistic… It is a political statement to say the oil sector will be booming and to talk of all these revenues.”

Even with extensive and promising seismic surveys, and multiple regional discoveries, attempts to quantify what is actually below the Lebanese seas are merely educated guesses at this point. “All a seismic survey tells you is that there are certain subsurface structures but they could be full of water; you have to have drilling going on to find out what is down there,” explains David Aran, founder and owner of London-based Petroleum Development Consultants Limited (PDC).

The bureaucratic botch

Nonetheless, encouraged by the regional finds and goaded on by the fact that it is now years behind neighboring countries’ efforts, Lebanon is finally moving toward drilling the seabed to see what is actually there. The first incremental step came on August 17, 2010 when the Lebanese parliament passed the Offshore Petroleum Resources Law, drafted by the Ministry of Energy and Water (MoEW) with assistance from the Norwegian Agency for Development Cooperation (NORAD).

However, due to the idiosyncrasies of the Lebanese political and legal systems, the law does not actually come into effect until the necessary implementation decrees are passed by the Council of Ministers, Lebanon’s cabinet.

The January 4 edict was one such decree — there are more than two dozen in total — enacting the creation of the Petroleum Administration, a prerequisite for the cabinet to enact the subsequent decrees for managing the sector, known as the Petroleum Activities Regulations (PAR).

The next hurdle to developing Lebanon’s offshore ‘play’ — an industry term describing the activities associated with petroleum development in an area — will be in the formation of the Petroleum Administration. Determining the exact role of this body, who will staff it and its level of independence will have a sizeable impact on the evolution of the sector as a whole. Consensus is far from assured.

As Executive went to press the six members of the Petroleum Administration’s board had not been selected, but the MoEW stated cabinet would appoint the posts by the end of January based on proposals from the Minister of Energy and Water, Gebran Bassil.

The law stipulates that the Petroleum Administration “shall enjoy financial and administrative autonomy with the Minister exercising tutelage authority,” but Cesar Abou Khalil, advisor to Minister Bassil, says, “The funding is already in the budget of 2012, which has an allowance for their salaries and the minister of energy and water allows it from his budget. This is a body inside the Ministry of Energy and Water.”

This raises questions regarding the independence of the Petroleum Administration.

There is also uncertainty over its role in relation to the MoEW. In a presentation by the ministry at the Lebanon Petroleum Exploration Forum 2011 last summer, the authority was labeled as a ‘regulatory body’ (along with the ministry). But, Abou Khalil argues: “It is not a regulatory body. It is purely consultative and is under the minister and nobody else.”

Opposition MP Qabbani responds to this with an excoriating critique of Minister Bassil, claiming he seeks hegemonic control of the industry, going so far as to compare his managerial style to that of Hitler. “The minister wants to control the signature of everything,” says Qabbani. “The minister is going to do his best to make sure he controls the [Petroleum] Administration and we will do our best to make sure that he can’t do that.”

Considering the prospect that this embryonic sector could precipitate a tectonic shift in Lebanon’s economic, political and social landscapes, its governance and institutional frameworks are of primary importance. Abou Khalil claims there is sufficient governance within a three-tier system, whereby the Petroleum Administration makes suggestions to the minister who will then enact them if he is able to, and if not he will send them to the cabinet.

“The Petroleum Administration, the Council of Ministers and the Minister of Energy and Water will all regulate one another,” he reasons. As for the prudence of creating an independent body to regulate the sector he simply asks: “Why do you need a regulatory body?”

Once the Petroleum Administration is appointed by the cabinet, it can begin the process of passing further implementation decrees to move the country into the early stages of the exploration phase, where companies prospect for oil or gas in Lebanese waters. The MoEW has laid down targets to enter into the first licensing round of the tender process within the first quarter of 2012, and to sign the first contracts by the end of the year.

All prospective companies will have to pass through a pre-qualification phase and only consortiums of three or more companies in an unincorporated joint venture can actually bid for tenders. Successful applicants will be granted exploration and production agreements (EPAs), allowing them to explore specific areas, called ‘blocks’, for potential black gold.

Lacking tools for the task

According to the law, the Petroleum Administration’s role in this crucial phase will be to draft invitations for bids, assess the qualifications and capabilities of applicant IOCs and assist the minister in negotiating exploration and production agreements. AUB’s Chaaban, however, frets that the Petroleum Administration will be ill-equipped to fulfill its mandate.

“We definitely won’t have a qualified team to run [the Petroleum Administration]… The ministry will probably end up choosing the companies, which is not a good thing,” he says. “You need an independent authority that has the ability to choose on a technical and sound basis who will get the contracts.”

Not only does Chaaban raise concerns over the potential for the co-opting of the tender process by political and business interests, but he also argues that Lebanon is in a weak position to negotiate good contractual terms with prospective companies.

“I don’t think any rational investor will opt for arrangements that are favorable to the local government,” he says. One of the several justifications Chaaban offers for his skepticism is rooted in what he says is the Lebanese government’s terrible track record in honoring its contractual agreements. He cites the telecommunications debacle in the early 2000s — the last time the networks were up for privatization — when France Telecom was awarded $266 million by an international court that found Lebanon in breach of contract.

Still interested?

“Lebanon’s bad reputation is true,” says Salah Khayat, chief executive officer of the nascent firm Petroleb, the local partner in a consortium that is being put together for a potential bid in Lebanon’s offshore play. But, he adds, “that has a lot to do with who was running the country in the past. There is a huge difference now and things are being done right this time.”

Salah’s uncle Tahseen Khayat is a media magnate who has had an openly caustic relationship with the previous governments of both Rafiq, and later Saad Hariri. Khayat says, however, that this is not reflected in his assessment of the current Lebanese administration. “We are very business orientated, we do not look at any political side of the story… Does my uncle have anything to do with this? We have his full blessing,” he stresses.

Khayat says his own prospective consortium, whose members he declined to name specifically, includes a major company from the Gulf — where his immediate family have decades of experience in the petroleum industries — and three other international players. He argues there has been a high level of global interest in the incipient sector which is confirmed by Sverre Strandenes, executive vice president multi-client for PGS (the company that has conducted the most detailed seismic studies of Lebanon’s seabeds). He says, “There has been good interest [in data on Lebanon’s fields].”

Minister Bassil has also alluded to “serious interest” from Chinese, European, American and Russian firms, while the Iranian news agency Fars has reported that Tehran is seeking greater cooperation with Lebanon in the energy sector, especially regarding exploration.

Negotiating the nitty-gritty

Whilst the IOCs are now analyzing their data, forming their alliances and devising their strategies, they will soon knock on the door for access to Lebanon’s waters. When this happens the government will find itself at the bargaining table with some seasoned and incredibly powerful players. In the coming months the PA and the MoEW will be detailing the mechanisms by which the prospective consortiums and the government will divvy up the spoils of any discoveries using a combination of royalties, concessions and Product Sharing Agreements (PSA) — the method of sharing extracted resources between the government and oil companies.

PDC’s Aran shares Chaaban’s view that Lebanon will have to play smart if it is to seal deals that will ultimately benefit the nation. “PSAs are like any market with a buyer and a seller. Lebanon is a seller so they have got to attract the companies. They will need to have low taxes and low royalties. If you are [the government] sitting in Angola, the Gulf or Khazakstan, somewhere very highly prospective, you are going to say virtually all of the money is going to come to us. Lebanon is in a weaker position,” he argues.

Aran does however also argue that Lebanon has some trump cards it can wield to lure in prospective companies. Perhaps most important is an easily accessible and sizeable market for any future production. As Petroleb’s Khayat explains, “Gas infrastructure is rather expensive. The price of gas is in its transportation.”

Lebanon is itself in dire need of cheaper more efficient fuel supplies for its dysfunctional energy sector, which is almost entirely dependent on fuel imports. In the first ten months of 2011 alone the Ministry of Finance reimbursed Electricité du Liban (EDL) LL2.1 trillion ($1.37 billion) for fuel and gas purchases, marking a 44 percent increase on the same period the previous year. Making matters worse, the finance minister has predicted the total deficit of EDL at $2 billion.

To service this domestic market Lebanon already has the infrastructure in the Beddawi and Zahrani plants to burn natural gas, and for the export of any excess reserves it is connected to the Arab Gas Pipeline (although the viability of this depends on political and security developments in Syria).

Development of the natural gas infrastructure features highly in a 2010 policy paper for the MoEW. The establishment of a Liquified Natural Gas (LNG) terminal, the conversion or building of most power plants to run on natural gas and the construction of a coastal natural gas pipeline running between Beddawi power plant in the north and Zahrani power plant in the south are among the projects planned.

Lebanon’s somewhat colorful history of internal strife and regional conflagrations is always going to sit pretty high on a prospective investor’s risk assessment, which is further compounded by Lebanon and Israel’s disagreement over where the boundaries of their EEZs fall. Add to this a lack of proven reserves and questions over governance, and “there are enough reasons not to invest,” in the words of consultant Aran. In such an environment the attractive markets for future discoveries are a strong bargaining chip. “It’s a sales job. You are in competition for exploration dollars. It’s like selling a house. If you have a small garden you say, yes but it’s a lovely view,” he reasons.

Casting a glance several years down the line beyond the exploration phase lie perhaps the greatest uncertainties and potential for ruin. Whilst the fate of any drilling expeditions cannot be realistically foretold, the prospect of a massive hydrocarbon windfall is very real. Based on a price of $120 per barrel, independent energy consultant and Secretary General of the World Energy Council’s (WEC) Lebanon Member Committee, Roudi Baroudi, predicted in a 2008 study that Lebanon could expect to enjoy a bounty of LL211 trillion, ($140 billion dollars) over a 20-year period from its offshore oil and gas reserves.

Oil’s curse

For a country with a national debt of more than $50 billion — exceeding 130 percent of gross domestic product — and a near complete reliance on fuel imports to meet its energy needs, the discovery of oil or gas might sound like a panacea. The pitfalls of transitioning into a resource dependant economy, however, are significant.

The major worry is that Lebanon may catch a variant of what is called ‘The Dutch Disease’, which, broadly speaking, is the decline of other economic sectors — usually manufacturing and agriculture — associated with the increased exploitation of natural resources. The basic premise is that increased resource revenue will inflate the value of the local currency and make other exports less competitive, while at the same time economic emphasis in that one area will undermine development in other sectors.

“The economy will be geared towards one sector which will absorb all the resources and expertise and the attention of policy makers, which would make investments in industry and agriculture even less than now,” says economist Chaaban.

Nigeria is among the textbook examples of a resource boom gone wrong: narrow economic focus on oil exploitation through the later half of the last century led to a steep decline in agriculture and other economic sectors, such that today the country’s GDP is actually in the range of what it was in the 1960s. So while there has been little net gain in overall national wealth, what has happened is wealth and wealth generation have become highly concentrated in and around the oil industry, leaving the vast majority of the country much worse off than they were before the resource boom.

Securing the piggy bank

Abou Khalil at the MoEW says the ministry has incorporated the creation of a sovereign wealth fund (SWF) into the Offshore Petroleum Resources Law so as to counter the threat of Dutch Disease, fiscal profligacy and political manipulation of the revenue.

In a January 23 meeting with the Association of Banks in Lebanon, Prime Minister Najib Mikati announced that the revenues from the fund will go towards reducing the public debt-to-GDP ratio to 60 percent — it currently exceeds 130 percent — before fulfilling any other expenditures. While the stipulation for an SWF is welcomed across the board as a necessary measure, the politicians are in no hurry to realize its creation.

“It isn’t a very imminent question… I strongly believe we have time,” says Abou Khalil, and in a rare note of agreement opposition MP Qabbani states: “There won’t be any funds for the coming six or seven years, why fight over [the SWF] if there won’t be any funds in that time.”

Their aversion to tackling the thorny questions over the nature of the SWF and its management is understandable due to the political wrangling that is bound to ensue. Deciding where such a potentially handsome hoard of cash will reside and under whose purview will certainly set a cat amongst the pigeons in the circus of Lebanese politicians. So, to get the current Offshore Petroleum Resources Law passed, the issue has essentially been kicked into the long grass.

Some argue, however, that the creation of the SWF is a pressing concern that should not be avoided. Energy consultant, Baroudi, says, “The most important [decree] is to pass a law to create the sovereign wealth fund. This should not wait. It is not important just to explore and produce but you need to protect the wealth.”

Ashby Monk, a visiting research associate at the University of Oxford School of Geography and the Environment and co-director of the Oxford SWF project, is a global authority on SWFs. He concedes that while it is not necessary to have people “twiddling their thumbs” at the SWF now, “You would want the legal framework set up before hand. That is an ideal. The earlier you articulate the regulatory framework, where it is going to be housed, etcetera, the better.”

An SWF is also not a cure-all for potential abuses derived from hydrocarbon revenues, as there are ample examples globally of mismanaged SWFs. In compiling a SWF scoreboard for his book, ‘Sovereign Wealth Funds: Threat or Salvation?’, Edwin Truman found that around 57 percent of the funds had guidelines integrating the use of their earnings, but only around a quarter consistently followed them.

The prospective future

Even in the most optimistic assessments, Lebanon will not be reaping the fruits of its labor in the hydrocarbon sector for two to three years, and in reality it is more likely to be five to 10 (assuming there are actually commercially viable fields to be drilled).

The allure of the petrodollars may be a dizzying prospect, but its capacity to further empower corruption in the nation’s politics and blight other sectors of the economy are grave threats that cannot be ignored. As the nation careens ahead on its hydrocarbon adventures there is an urgency to ensure that the ship is setting sail on course. There will be no second chance.
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Old April 11th, 2012, 07:04 AM   #199
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Lebanon delays gas tenders, sets up oversight panel
April 11, 2012 01:26 AM
By Laila Bassam
Reuters
Lebanese Energy and Water Minister Gibran Bassil speaks to the press before the start of the opening ceremony of the International Energy Forum in Kuwait City on March 13, 2012. (AFP PHOTO/YASSER AL-ZAYYAT)
Lebanese Energy and Water Minister Gibran Bassil speaks to the press before the start of the opening ceremony of the International Energy Forum in Kuwait City on March 13, 2012. (AFP PHOTO/YASSER AL-ZAYYAT)

BEIRUT: Lebanon is delaying tenders for offshore exploratory drilling as it sets up an oil and gas oversight committee, but seismic tests suggest increasingly large potential gas reserves, Energy and Water Minister Gebran Bassil said.

Interest in drilling in the eastern Mediterranean has grown since two natural gas fields were discovered off the coast of Israel, Lebanon’s southern neighbor. Estimates value those reserves at tens of billions of dollars.

Lebanon had aimed to launch tenders for exploration drilling by the end of March, but oil industry sources recently said the licensing round was expected around mid-year.

Bassil told Reuters in a telephone interview that delays in establishing an administrative state oil body were holding up the plans but did not set a new target date for the licensing round.

“Before we form the committee, we can’t talk about tenders,” he said.

Twenty-seven companies have bought seismic surveys of the coastal waters, and several have expressed interest in drilling including British oil explorer Cairn Energy and London-listed Genel, he said.

Cairn’s local partner is CC Energy Development S.A.I, an associated company of CCC, a Lebanese private firm.

Cove Energy, currently subject to a bid battle between Royal Dutch Shell and Thailand’s PTT, has also said it is considering entering the licensing round with Cairn and CCC.

Analysis of three-dimensional seismic data is continuing and has shown increasingly encouraging prospects, Bassil said. “We can’t talk today about expected [quantities of gas], but every time [we review the data] it gets better,” he added. “Between the 2-D and the 3-D surveys we confirmed additional quantities three to five times higher in the survey areas.”

“There is a high possibility of very promising commercial quantities of gas,” he said.

Any sizeable gas discovery and production could help Lebanon tackle chronic power shortages, which result in daily power cuts across the country of between three to 10 hours.

Bassil plans to lease two electricity generating boats, possibly from Turkey, to meet some of the shortfall, while the Cabinet addresses plans to build new power plants or expand existing ones.

Lebanon remains in dispute with Israel over an 850-square-km stretch of sea off their coast, but Bassil has dismissed concerns over possible delays to drilling over the disagreement.

The disputed region lies close to a region where U.S. and Israeli firms discovered the two massive natural gas fields.
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Old June 27th, 2012, 06:49 AM   #200
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Cyprus seeks amicable solution for maritime border zone
June 27, 2012 12:53 AM
The Daily Star

BEIRUT: Cypriot President Demetris Christofias said Tuesday that he would continue to seek an equitable solution for the maritime border zone dispute between the regional states once he becomes president of the European Union in four days.

During a regional conference on energy in Nicosia, Christofias admitted to the participants in a Q&A session that there are some complicated border disputes between countries sharing the maritime border zone, adding that these topics should be sorted out soon.

Lebanon insisted on redrawing the economic maritime border zone which it shares with Cyprus and Israel. The zone is supposed to have large quantities of natural gas.

Lebanon is demanding the U.N. oversee the demarcation of the maritime border zone in order to determine the country’s actual territorial borders.

The government has not yet issued a tender to explore oil and gas offshore.

Energy and Water Minister Gebran Bassil, one of the speakers at the one-day conference, told participants that Lebanon insists on rectifying the mistakes of the maritime demarcation and stressed that his country wants another demarcation that will win the approval of the government.

Bassil said that dozens of companies have bought geophysical data that contains information on the reserves off the Lebanese coast.

“We can proudly say, thanks to these findings, that there is high probability for the success of drilling and exploration,” Bassil said.

He added that Lebanon is determined to exercise its full rights over the entire maritime economic zone which belongs to Lebanon.

“We expect from our friends, the Cypriots, to make an extra effort to avoid the fatal technical mistake which occurred between Cyprus and Israel when the border zone between both countries was drawn,” the minister explained.

Leading energy expert and secretary-general of the World Energy Council Lebanon, Roudi Baroudi urged the countries with claims in the area to focus first on what could be done without exacerbating tensions and then on how disputes could be resolved peacefully

“None of the countries involved can afford to have their economic fortunes sunk by gunboat diplomacy,” Baroudi said on the sidelines of the event.

“The value of the energy deposits in question is nothing short of gargantuan, so there’s plenty to go around. Negotiating mechanisms for dispute resolution and joint development wouldn’t be easy, but the payoffs – for all concerned – would be enormous.”

Baroudi’s comments echoed his presentation to the forum, which stressed dialogue and cooperation as a means of maximizing benefit from the Levant Basin.

At average prices for the current year, the deposits in question were recently estimated to hold $170 billion worth of oil and a staggering $1.9 trillion worth of gas. For perspective, the latter figure amounts to 13 percent of all the goods and services produced in the United States in 2010,” he said.

Baroudi has urged all parties to at least start defining their Exclusive Economic Zones, and place their trust in the United Nations Convention on the Law of the Sea and the International Court of Justice when it comes to adjudicating disputes over maritime boundaries.

Christofias said Cyprus’ role in the global energy map has been enhanced, following the discovery of natural gas in the island’s Exclusive Economic Zone. International interest for the second Licensing Round has increased.

“A total of 33 applications from 15 companies [and] joint ventures from 14 countries, including France, the U.S., Russia, South Korea, Malaysia, Italy and Australia were finally submitted. As a consequence, new perspectives are opening up, giving new impetus to Cyprus’ role within the global energy system and the European energy market,” the Cypriot president said.

He added that the eastern Mediterranean Sea region could be transformed into an area of common borders and interests for everyone, offering prospects for peace, prosperity and progress in the wider area.

“At long last, we have the historic opportunity to work sincerely, constructively and in good faith for the benefit of our people,” Christofias said.

A version of this article appeared in the print edition of The Daily Star on June 27, 2012, on page 5.
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