Lebanon: The Oil & Gas Week, June 24, 2013

Lebanon – Local politics:

The extension of the Parliament’s mandate went into effect on Friday 21/06 and became legal by default, after the Constitutional Council failed to convene four times to look into the challenges submitted by President Michel Slaiman and Free Patriotic Movement (FPM) MPs. Two Shiite judges and a Druze judge, bowing to political pressures (from Shiite and Druze political parties), boycotted the sessions and their absence denied the 10-member Council of the legal quorum to hold meetings. This latest episode is indicative of the blurry and relative nature of the separation of powers in Lebanon. While unfortunate for Lebanese citizens from a democratic point of view, the fact that the Judiciary can be tweaked, and that political connections can be decisive, must be understood and fully grasped by foreign companies seeking to do business in Lebanon. The identification of official, and above all shadow decision-makers and influential networks is a priority.

Lebanon – “Lebanese Economy: How to Turn Challenges into Opportunities”:

The Progressive Socialist Party’s cultural association, Mountada al-Fikr al-Taqqadumi, organized a conference on 19/06 under the patronage of PSP leader Walid Joumblat, and in cooperation with the Friedrich Ebert Foundation, on how to turn the challenges faced by the Lebanese economy into opportunities. The event was an opportunity for Joumblat, who was unable to attend and was represented in the opening ceremony by Bahij Abou Hamze, to provide further visibility to Abou Hamze, his candidate for the Ministry of Energy and Water. Abou Hamze is known to the public as the president of the Association of Petroleum Importing Companies, but lacks the required exposure for a high-profile position. The event served to highlight his experience in the petroleum industry and to promote his “candidacy” for the post of “Minister of Energy and Water”. Beside his opening speech, Abou Hamze also intervened in the third and last session before wrapping up the conference and announcing the participants’ recommendations. His intervention touched on the role of petroleum resources in inducing an economic recovery. The event received wide coverage in the press the next day, on 20/06, although the press failed to notice one of the main recommendations of the conference, regarding the need to establish a separate ministry for petroleum resources. In what seemed like a coordinated move, several newspapers published an article listing the conference’s recommendations on 21/06, highlighting in particular the need to split the Ministry of Energy and Water, and to establish a separate petroleum ministry, to reform the Petroleum Administration and to establish a sovereign wealth fund.

Lebanon – First licensing round:

The Petroleum Administration held a consultation workshop with pre-qualified companies on 18-19/06, to discuss the model exploration and production agreement and other issues related to the first licensing round. Interested companies had until 15/06 to indicate which of the offshore blocks they are interested in, two weeks before the Ministry of Energy announces which blocks will be available for bidding, on June 30. According to caretaker Energy Minister Gebran Bassil, all of the offshore blocks were nominated, including those along the Lebanese-Israeli border and the Lebanese-Syrian border. Promising areas were thought to be concentrated in the southern and northern part of the EEZ, but initial assessment of surveys being conducted by Spectrum in an area covering most of block 3 and small parts of blocks 1, 5 and 6 (in the center of Lebanon’s EEZ), show that it may contain 15-20 tcf of natural gas. As we have said in a previous report published on June 03, Block 3 has the potential of becoming one of the most attractive blocks for investors.

Lebanon – Academic formation and programs:

The Lebanese University will inaugurate a new Geology Faculty (date not announced), with the objective of forming skilled workers for the country’s oil and gas industry. The proposal, made by Hezbollah MP Nawwaf Moussawi, was approved by the Parliament’s Justice and Administration Committee on 17/06. While it is expected of the Lebanese University, Lebanon’s only public university, to respond to the needs of the oil and gas industry by providing related degrees, MESP fears the proliferation of petroleum related-degrees offered by Lebanese universities without any coordination, similar to the proliferation of the number of universities (around 30, in a country of 4 million, half of which were granted a license from the Ministry of Education since the mid-1990s), many of which do not in fact qualify as institutions of higher education. As MESP has said in a previous report [see “Lebanon – Academic formation and programs” in Lebanon: The Oil & Gas Week, May 13, 2013], academic formation must be part of a national strategy that would study and define the needs of the local oil and gas industry before proposing relevant programs to cater to these needs, to avoid an influx of newly-graduates that would flood the job market in a few years.

Israel – Gas exports:

After months of delay, the Israeli government has cleared the way for gas exports, pressured by oil and gas companies, particularly Noble Energy, who threatened not to develop the Leviathan field unless gas exports are allowed, and Woodside which is trying to acquire 30% of Leviathan and has set a June 30 deadline for closing the deal. Although the gas discovered off the Israeli coast is far superior to any projected domestic demand over the next 50 years, there is a strong opposition among the Israeli public and political class against assigning some of it for export. In 2012, an inter-ministerial committee set up to advise the government on the overall gas policy and headed by Shaul Tzemach, recommended in its final report that Israel export roughly half of its gas, and keep enough gas to supply the demands of the local economy for 25 years. The government however decided to keep 540 bcm (60%) of natural gas for domestic use and authorize the export of only 40%, to ensure the country’s energy security. In Lebanon, and although some voices are also calling for limiting gas exports and keeping it for local consumption, the government is certain not to take such a decision. Local market is too small and is not projected to grow significantly, and companies are not prepared to commit billions of dollars for developing a field if the gas is only assigned for domestic use.

Previous reports:

Lebanon: The Oil & Gas Week, June 17, 2013
Lebanon: The Oil & Gas Week, June 10, 2013
Lebanon: The Oil & Gas Week, June 03, 2013
Lebanon: The Oil & Gas Week, May 27, 2013
Lebanon: The Oil & Gas Week, May 20, 2013

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