Beirut eyes offshore oil and gas round

Lebanon hopes to launch a licensing round for offshore oil and gas exploration this year, but translating unproven potential into genuine resources will require more political unity

Lebanon is planning to hold its first licensing round for offshore oil and gas contracts by November 2011, according to a statement by energy and water minister Gebran Bassil.

The announcement, made in mid-November, followed the passing of the country’s first hydrocarbons law by parliament on 17 August. Geologists have been appointed to assist with the data room on the new licensing round, said the minister, and international advisers are also due to be appointed to help manage the tendering process.

Contractors have, meanwhile been invited to express an interest in work on the country’s potential onshore oil and gas resources. Information requests must be lodged with the energy ministry by 25 January.

Potential gas reserves in Lebanon

For a country that is overwhelmingly reliant on imports to supply its domestic energy requirements, this marks significant progress. Seismic surveys indicating the potential for substantial reserves of natural gas offshore Lebanon were carried out in 2006 and 2007.

In March 2010, the US Geological Survey concluded in a study that there are an estimated 1.7 billion barrels of oil and 122 trillion cubic feet of gas in the Levant basin, offshore Lebanon, Syria, Cyprus and Israel.

Beirut has been spurred into action by the much more advanced plans of neighbouring Israel to start exploiting its offshore resources. A consortium of the US Noble Energy and local partners made the world’s largest gas discovery in 2009 offshore Israel, the Tamar field. The deepwater field has estimated reserves of 238 billion cubic metres of gas, and production is due to begin in 2014.

A second Israeli offshore field, Leviathan, is believed to be almost twice as big. According to Noble Energy, the field holds a potential 453 billion cubic metres of gas. Exploration is under way, and if the results due next year show the fields to be commercially viable, production could begin by 2016. Tel Aviv hopes that the two gas fields will meet domestic gas demand for at least 20 years, and plans are being developed to export the gas to Europe by Greece.

Israel’s success offers hope that similar discoveries can be made offshore Lebanon, and with similar benefits. Lebanon’s power sector is in disarray. In the summer, government rationing of electricity became so severe in some parts of the country that the army was forced to intervene to disperse protesting residents who had used rocks and burning tyres to set up impromptu roadblocks.

According to one member of Hezbollah, the militant Shia movement that shares power with Saad Hariri’s March 14 grouping, the summer power shortage was “threatening the economic, social and living dimensions of people”.

The energy shortage is also financially crippling for the government. The state electricity sector lost an estimated $4.4bn in 2010 and without further action this is expected to rise to $9.5bn in 2015. State power company Electricite du Liban costs the government an estimated $1.5bn a year in subsidies.

Although the government passed an energy strategy in 2010 under which it plans to add more than 4,000MW of generation capacity by 2014, little headway has been made in determining how this might be achieved.

Lebanon’s oil and gas potential offers the promise of a future in which such problems can be overcome, or at least mitigated.

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Richard Nield is a freelance journalist, photographer and filmmaker covering the Middle East and Africa. In 10 years covering the region, he has been published and broadcast by clients including the BBC, Reuters, Al Jazeera, The Economist, The Financial Times, The Independent and Foreign Policy magazine. He has reported from throughout the region, including Algeria, Egypt, Libya, Morocco, Tunisia, South Sudan, Jordan, Lebanon, Syria, Kuwait and Saudi Arabia.