Lebanon: The Oil & Gas Week, October 14, 2013

The past three weeks oil and gas have been the focus of chaotic political discussions fueled by a number of events, including developments related to the maritime border dispute between Lebanon and Israel, and the postponement of the first licensing round [see our flash update: Lebanon: Lack of political will delays oil and gas tender].

Debates on both topics reflected a general state of confusion and sometimes limited grasp of the issues at stake. The stalemate resulting from the failure to approve the two decrees should not be confused with the prevailing debate and the array of arguments that have been used in the past three weeks. To better understand the situation and where each actor stands, the question that should be asked is the following: who is in favor of proceeding with the first licensing round immediately and who is not? To avoid confusion, arguments beyond a direct positive or negative answer must be stripped off. The arguments – constitutional, economic, nationalistic etc. in nature – that are being used by the political class must not be taken literally. They should be seen as tools used primarily to advance their positions.

This chaotic atmosphere betrayed the Ministry of Energy’s poor public outreach and highlights the need for a crisis communication.

In the past week, caretaker Energy Minister Gebran Bassil’s strategy has been to bounce on local and international developments related to the Lebanese oil and gas sector to push for his primary objective: proceeding with the first licensing round.

At the local level, the October 2 deadline passed without approving the two decrees needed to complete the tender. On 04/10, Bassil announced the postponement of the first licensing round. The deadline for submitting bids was extended until January 10, 2014, amid verbal attacks from all factions, including among members of the same cabinet.  On 07/10, he did not rule out the possibility of proceeding with the tender without having to wait for the government to meet and approve the decrees. Bassil did not clarify on which grounds he intends to do so. But if the capacity of the caretaker cabinet to adopt decrees is in itself disputed, proceeding with the tender without the government’s approval and in such circumstances threatens to delegitimize the process even further.

Bassil was recently able to win a more active support from two of his main allies, Hezbollah and the Amal Movement, for holding a special cabinet session to approve the two decrees.

The support however was nuanced, Parliament Speaker and Amal leader Nabih Berri insisting more on the need to open up the 10 offshore blocks for bidding, while Bassil prefers to limit the bid to five blocks. Berri is invoking Israeli threats and ambitions in Lebanon’s exclusive economic zone as reasons to open up all of the offshore blocks at once (despite the fact that only three blocks run along the Lebanese-Israeli border). An article published on 29/09 in the Israeli business magazine Globes brought him an unexpected support. The article, part of which was misinterpreted and excessively publicized, kept local media and political class busy for days, alarmed by a potential Israeli aggression, though the original article made no reference to the use of military force. On the other hand, Bassil’s reaction to the article and Israeli threat was to push again for the holding of a government session in order to proceed with the tender and establish Lebanon’s rights in all its maritime area.

Political opponents who do not wish to see the tender proceed at this stage rushed to downplay Israeli threats. Others, like caretaker PM Najib Mikati’s close aide and current Minister of Economy Nicolas Nahhas went as far as saying that it might even be preferable to postpone the tender and benefit from more favorable gas prices in the future.

At the international level, Bassil sought to capitalize on recent significant developments: The US efforts to find a settlement to the maritime border dispute between Lebanon and Israel seem to have reached an advanced stage. The Minister is hoping the US involvement would translate into pressure on Lebanese authorities to put an end to internal bickering and proceed with the tender.

Once progress (over the maritime border dispute) has been established, Bassil finally headed to Moscow on 08/10, on a trip that was planned months ago but only conducted this week. The American initiative to settle the border dispute was facilitated by the recent coordination between the US and Russia on regional issues, and the favorable atmosphere following the resumption of contacts between Washington and Tehran. Bassil met with Energy Minister Alexander Novak and signed a memorandum of understanding strengthening energy cooperation between Lebanon and Russia.

Bassil also held meetings with representatives of Russian companies that have made it through the pre-qualification round. Although some of the biggest Russian companies are interested in the tender, none has sought an operator status. Russia is adopting a non-provocative approach in Lebanon, historically more open to western rather than Russian economic influence and is seeking to enter the market under a western cover: Rosneft partnered with ExxonMobil and LukOil teamed up with Total to submit joint bids in the first licensing round. Such partnerships are being interpreted in Lebanon, and by Bassil in particular, as a coordinated US-European-Russian effort to stabilize the situation in Lebanon and proceed with offshore exploration.

New Report: Lebanon’s Oil & Gas Sector: Potential and Opportunities:

MESP is in the process of preparing a report on the Lebanese oil and gas sector, focusing on its potential and opportunities, particularly for companies and businesses that are seeking to enter the Lebanese market.

For more information, or to order your copy, click here.

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

Our next report will be published on October 28, 2013.

Previous issues:

Lebanon: The Oil & Gas Week, September 23, 2013
Lebanon: The Oil & Gas Week, September 16, 2013
Lebanon: The Oil & Gas Week, September 09, 2013
Lebanon: The Oil & Gas Week, September 02, 2013
Lebanon: The Oil & Gas Week, August 19, 2013


Scroll to Top