[Oil & Gas Updates]: Weekly Roundup, April 22, 2013

Lebanon – Pre-qualification round:

In accordance with the Ministry’s schedule, caretaker Energy Minister Gebran Bassil held a press conference on 18/04, at the Petroleum Administration’s office, to announce the list of companies that qualified and are eligible to participate in Lebanon’s first licensing round. The event received a wide media coverage: In addition to LBCI (perceived as the least biased of Lebanese TV channels) the event was broadcast live on the usual TV channels that provide coverage for events held by the March-8 coalition and its allies: The Free Patriotic Movement’s OTV, Hezbollah’s Manar TV and the left-leaning al-Jadeed, whose owner, Tahsin Khayat, is the uncle of Salah Khayat, CEO of Petroleb, a Lebanese upstream oil and gas company that successfully pre-qualified, under a U.S. flag.

52 companies from 25 countries submitted applications to prequalify. A total of 46 firms, from 23 countries, made it through. Interestingly, the only companies from Iran (National Iranian Drilling Corporation) and from China (CNOOCIG) were disqualified. Among the 46, 12 qualified as operators and 34 as non-operators. Below is the full list of companies, those who made it and those who were rejected [Click on the picture to enlarge]:

List of qualified companies [Click on the image].

The selection process was scientific and relied on quantifiable parameters. Interested companies needed to demonstrate they met all the requested criteria (listed here). Those who failed to do so were disqualified. According to Lebanon’s Offshore Petroleum Resources Law, the companies that are planning to place bids must now form consortiums of at least three companies, one of which an operator, to bid for exploration rights. Lukoil has already announced, in March 2013, that it is partnering with Total. Rosneft’s CEO announced a similar partnership with ExxonMobil in April 2013. One of the first partnerships made public was between Cairn Energy and CC Energy, announced in August 2011. All these announcements must now be made official.

During the conference, Bassil made a tremendous effort – though he was not entirely convincing – to reassure journalists, and the audience beyond them, that the tender will be launched on time, and that the May 2 deadline remains unchanged, whether or not a new cabinet is formed. The Petroleum Administration, and the Ministry of Energy and Water, he said, have completed all the work related to the tender process, including the division of Lebanon’s EEZ into 10 blocks, and the drafting of the model exploration and production sharing contract, in addition to the book of conditions and the exploration strategy. The government, however, still needs to give its approval. It is unclear how Bassil intends to pursue the process before a new cabinet is formed. Further details, he said, will be provided in another press conference on April 30. On 19/04, and possibly in anticipation of Bassil’s move, caretaker Prime Minister Najib Mikati issued a circular [click here for the Arabic text] reminding caretaker ministers of the limits that the law imposes on their activities under a caretaker government, which, with the exception of certain cases, should not go beyond performing routine administrative work.

Bassil also addressed the issue of the maritime border dispute with Israel, and downplayed its implications, saying it will not have an impact, “as long as we are alert.” He denied stories reported by some Lebanese media claiming Israel is stealing Lebanon’s resources, and said Israel is exploiting resources that are far from the Lebanese borders, and Lebanon will also be focusing on resources within its own EEZ.

Bassil, who addressed his audience in English during most of the conference, received U.S. ambassador Maura Connelly, immediately afterwards. The visit, which came on the same day Secretary of State John Kerry slammed Hezbollah over the 1983 bombing of the American embassy in Beirut which killed 52 people, was an occasion for the ambassador to welcome the work of the Petroleum Administration and the Ministry of Energy and Water’s commitment to develop the energy sector, despite Bassil’s alliance with Hezbollah, and the rising tension between the U.S and the Shiite party.

Two days before the press conference, Bassil made a surprising visit to the Saudi Embassy in Beirut (on 16/04). Saudi Arabia, who did not manifest a particular interest in being associated in the exploitation of Lebanon’s offshore resources (none of its companies have applied to the pre-qualification round), seems to be regaining its influence on Lebanese affairs since the resignation of Najib Mikati’s government. Bassil met with Ambassador Ali Awad Assiri, as a representative of the Free Patriotic Movement, and not as caretaker Energy Minister. The visit demonstrates a certain willingness to cooperate and avoid confrontation over the formation of the next cabinet, if the main demands are respected. In the meantime, the Ministry of Energy and Water continues to be at the center of the debates. Attacks and counterattacks are becoming more and more explicit. The President of the Republic has reportedly joined the long list of those aspiring to control it.

Lebanon – Maritime border dispute:

Frederic Hof, former special coordinator for regional affairs in the US Department of State, and current senior fellow at the Atlantic Council’s Rafik Hariri Center for the Middle East, was a special guest at the Lebanese Army’s third regional conference on the main challenges facing Arab world in 2013, held on 11/04. In his presentation, Hof, who handled the issue of the maritime border dispute between Lebanon and Israel before leaving the State Department, focused on the need to find a solution that would allow both countries to exploit their natural resources without the specter of war that scares away investors. His presence received a considerable media coverage, despite the fact that he no longer represents the State Department. His past experience and knowledge in this particular portfolio, and the special relations he built with Israeli and Lebanese officials (particularly former PM Najib Mikati and his team) during his term, further boosted by this visit and the media coverage it received, allows him to promote his expertise, no longer as a public official, but as a private consultant.

In the media:

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