FLASH: Lebanon: Lack of political will delays oil and gas tender

In a statement released on 04/10, caretaker Energy Minister Gebran Bassil extended the deadline for submitting bids in the country’s first licensing round for offshore oil and gas exploration for a second time, from December 10, 2013 to January 10, 2014, after failing to adopt to the decrees that are necessary to proceed with the tender. In an earlier conference held on 04/09, Bassil had declared that if the decrees are adopted before October 2, the Ministry would still be able to respect its original program and deadlines. Today, we can officially speak of actual delays.

In his statement, Bassil urged President Michel Slaiman and caretaker PM Najib Mikati to hold an extraordinary cabinet session to adopt the missing decrees (one delimitating offshore blocks and their coordinates and the other approving the model exploration and production agreement), and to speed up the process in order to ensure Lebanon’s rights in all its EEZ, in light of recent reports in the Israeli press threatening action against Lebanon if Beirut awards exploration rights in the disputed maritime area claimed by both Lebanon and Israel. Bassil welcomed “those who joined us recently in calling for a cabinet meeting to approve the decrees,” hinting at two of his allies, Hezbollah and Speaker Nabih Berri’s Amal movement, but added that declarations are not enough if they do not translate into actual pressure to hold the meeting.

Press reports enumerated a number of reasons explaining the delay: 1) those who have been sidelined from the process, as a result of their non-participation in the last government, prefer to stall the process and relaunch it once they are in power to ensure a stake; 2) others see in the exploitation of offshore resources a possible energy independence. Energy dependence on the Gulf has so far provided Gulf monarchies a political influence in the country, and a political and financial backing for local factions depending on these monarchies; 3) many, among the political class, do not want to proceed with the tender as long as Gebran Bassil is heading the ministry.

On 31/07, caretaker PM Najib Mikati declared his intention to call for a cabinet meeting to approve the decrees within a period of 5 weeks if no new cabinet is formed (by mid-September), after Bassil held a press conference on 05/07 and revealed that Israel has now the ability to siphon off Lebanon’s gas. This allowed him to avoid the pressure resulting from the momentum carefully created by Bassil at the time, and in September he was able to rule out the possibility of holding a cabinet session, without attracting much criticism (except from Gebran Bassil and the FPM). Following the momentum created by Israeli threats against Lebanon this week, sources close to Mikati told Lebanese daily Assafir that he would be willing to call for a cabinet meeting if there is a political consensus around the subject and once he returns from his trip to the US. His close aid and current caretaker Minister of Economy and Trade Nicolas Nahhas announced on 05/10 that delays do not necessarily reflect negatively on the sector, and may in fact improve the political and economic conditions surrounding the exploration process. This is the first declaration by a member of the current (caretaker) cabinet that delaying the tender might actually be preferable than completing it at this stage.

MESP believes that the lack of a unified vision for the sector and severe political discord among the political class are the reason behind the delays. A third delay in January will constitute a setback and cast doubts over the Lebanese authorities’ ability to successfully organize this tender.

MESP will provide a more detailed analysis in the next edition of its “Lebanon: The Oil & Gas Week” report to be published on October 14, 2013.

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