Lebanon: The Oil & Gas Week, July 08, 2013

Lebanon – Israel:

Caretaker Energy Minister Gebran Bassil held a press conference on Friday 05/07 to warn of possible threats resulting from the discovery of the Karish gas field in Israel, close to the Lebanese border. As we expected in a previous report when Israel announced the discovery of a potential gas field in Karish-1 [see “Israel – Karish 1” in Lebanon: The Oil & Gas Week, May 20, 2013], possible drilling so close to the Lebanese border has indeed raised alarm bells in Lebanon and increased fear that Israel could attempt to tap Lebanese gas.

The hours leading up to the conference were characterized by a combination of suspense and sensational announcements. The media was called on short-notice. The conference was announced on Bassil’s twitter account on Thursday 04/07, in the afternoon, in a way sure to draw attention, but without revealing the real issue. But the topic was leaked to Lebanese daily Assafir, known for its Arab nationalist tendencies and committed stance against Israel, who reported on the morning of 05/07, hours before the conference, that the “oil & gas dossier” must be pushed to the forefront (of political discussions) again, in light of “critical” developments in Israel, which will be detailed by Bassil in his press conference. The paper added that the issue is of “extreme urgency” and places great responsibilities on Lebanese authorities and on the government, regardless of its caretaker status.

The conference was short, broadcast live on Lebanon’s main TV channels. Bassil went straight to the point and said that the discovery of the Karish gas field in Israel, 4 km from the Lebanese border, makes it technically possible for Israel to siphon off Lebanon’s gas, using advanced drilling techniques. The minister was prudent, and repeated several times during the conference, and the Q&A session that followed, that Israel did not steal Lebanese gas yet, but may be tempted to do so in the future, particularly if the Lebanese are slow to exploit their resources. Lebanon needs to take action because the issue is “urgent”. In a hint to his Hezbollah allies (and despite uneasy relations, lately, which has led Bassil’s party, the Free Patriotic Movement, FPM, to reassess its political stances and alliances, culminating in a meeting between the party’s leadership, including Bassil, and the Saudi Ambassador on 02/07) Bassil said that Lebanese resources are well-protected thanks to what is commonly-referred to in Lebanon as the “people, army and resistance” formula, a main element in Lebanon’s defense strategy against Israeli aggression.

Beyond Israeli threats, the main message of the conference was the more familiar argument of proceeding with offshore oil and gas exploration without delays and respecting Lebanon’s commitments and deadlines, made particularly hard after the resignation of the Mikati cabinet in March 2013, before the adoption of two important decrees related to the definition of offshore blocks and their coordinates and the adoption of a model exploration and production contract. A caretaker cabinet cannot, in principle, adopt decrees, the Constitution restricting the exercise of its powers to the management of day-to-day affairs. But in certain circumstances, a caretaker cabinet may be authorized to adopt new decrees. Bassil, and the FPM, have been lobbying – unsuccessfully so far – the President, Parliament Speaker and caretaker PM to authorize a cabinet meeting in order to approve the two decrees. The reference to Israeli threats, a unifying factor in Lebanon, may convince them of the need to hold a cabinet meeting and adopt the decrees. It remains to be seen if this latest attempt to push for a cabinet meeting will be more successful. Bassil seems to have caught the attention of caretaker Foreign Minister Adnan Mansour, a member of Speaker Nabih Berri’s Amal Movement, who asserted that appropriate measures will be taken to counter Israeli threats.

The commercial dimension must not be missed. If the decrees are not approved by September 2, 2013, the caretaker Energy Minister is theoretically authorized to extend the bidding period [refer to “Lebanon – First licensing round” in our May 6, 2013 roundup for more details on the process and related dates and deadlines]. But this does not augur well for the rest of the process and may cool off certain oil companies that have expressed interest in Lebanon’s first licensing round. Blocks that will be put up for bidding have not been announced yet (although the announcement was expected on June 30). This is the first self-imposed deadline in the bidding process that the Ministry of Energy and Water has missed. MESP hopes that this is not the first in a series of missed deadlines. It is of utmost importance for Lebanese authorities to shield the process from political deadlock, regardless of the imminence, or not, of the Israeli threat.

Lebanon – India:

The Indian Minister of External Affairs Shri Salman Khurshid visited Beirut on 01/07 and met with President Michel Slaiman, caretaker PM Najib Mikati and his Lebanese counterpart Adnan Mansour. Khurshid expressed his country’s interest in the Lebanese oil and gas sector and confirmed India will be represented in the country’s first licensing round. Two Indian companies had qualified for the bid as non-operators: ONGC and Cairn India (although it applied as operator). From a Lebanese perspective, India is an attractive partner: strengthening energy cooperation would present Lebanon an interesting export option. In addition, India is perceived as a neutral partner by all Lebanese sides, and doesn’t have a history of controversial political intervention in Lebanese affairs. On the contrary, India is actively contributing to ensuring security and stability in southern Lebanon, through the deployment of a 900-member unit, one of the largest UNIFIL contingents.

Lebanon – Cyprus:

On his way back from Bahrain, where he attended an EU-GCC Summit, Cyprus Minister of Foreign Affairs Ioannis Kasoulides stopped in Beirut for a 4-hour visit on 01/07, during which he met with caretaker PM Najib Mikati and his Lebanese counterpart Adnan Mansour. Discussions focused on the Syrian crisis, and its security and humanitarian implications for Lebanon, particularly with the influx of hundreds of thousands of refugees. Energy cooperation was not high on the agenda, which explains why Kasoulides did not meet with caretaker Energy Minister Gebran Bassil, who will visit Cyprus later this month, but discussions did address maritime border delimitation between the two countries and the possibility of reviving the Lebanese-Cypriot committee in charge of coordinating efforts to demarcate Lebanon and Cyprus’ EEZ. The issue is directly related to the maritime border dispute between Lebanon and Israel. It is not clear if the Cypriot minister submitted any message for Lebanese authorities in that regard. Cyprus attempted a mediation in the past, and the issue is repeatedly brought up during meetings with Cypriot officials in Beirut (Minister of Energy, Commerce, Industry & Tourism Giorgos Lakkotrypis on April 3, 2013; former President Demetris Christofias on January 9-11, 2013Parliament Speaker Yiannakis Omirou’s visit on December 3-5, 2012; and the Director of the Energy Service Solon Kassinis’ visit on December 3-4, 2012) but without much success so far.

Eastern Mediterranean – Russia:

The past weeks have seen a surge in diplomatic activity between Cyprus and Russia. A parliamentary delegation headed by Speaker Yiannakis Omirou arrived to Moscow on 03/07 for a two-day official visit. Omirou met with Russian Deputy Minister of Energy Yury Sentyurin. Also present at the meeting were representatives of Novatec and GazpromBank. Novatec and GPB Global Resources were part of a consortium, also including France’s Total, pre-selected for exploration rights in Block 9 in Cyprus EEZ, but negotiations were suspended by Cyprus, and the license was ultimately awarded to ENI and KOGAS. This effectively excluded Russian participation in developing Cypriot gas at the time. But Russia seems to be trying to find alternative ways to guarantee a certain involvement in the Cypriot gas sector. According to Omirou, the Russians have made it clear that Russia has a strategic interest in the energy developments in the Eastern Mediterranean. The Russians have reportedly inquired about the LNG plant Cyprus is planning to build in Vasilikos. If the project is implemented, it would guarantee that a portion of Cypriot (and perhaps Israeli and Lebanese) gas is directed to non-European markets. Russia and Cyprus are also looking to deepen their military cooperation. According to Cypriot Defense Minister Fotis Fotiou, Moscow is seeking the use of sea and air facilities in the Island by its navy and air force.

Middle East Strategic Perspectives – Lebanon: The Oil & Gas Week:

Please note that our next report will be published on August 5, 2013.

Previous reports:

Lebanon: The Oil & Gas Week, July 1st, 2013
Lebanon: The Oil & Gas Week, June 24, 2013
Lebanon: The Oil & Gas Week, June 17, 2013
Lebanon: The Oil & Gas Week, June 10, 2013
Lebanon: The Oil & Gas Week, June 03, 2013

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