Lebanon: The Oil & Gas Week, January 13, 2014

Lebanon – First licensing round:

Caretaker Energy Minister Gebran Bassil postponed the tender for the “third and last time” on January 8, due to the absence of two important decrees, one defining offshore blocks and their coordinates and another one approving the model exploration and production agreement. The new deadline for submitting bids is April 10, 2014.

As Middle East Strategic Perspectives has written shortly after the tender was postponed:

The announcement was expected as more and more political factions spoke publicly in favor of delaying the tender. The latest public figure calling to postpone the bid was President Michel Slaiman, leaving Bassil’s Free Patriotic Movement and, to a lesser extent, Hezbollah and Speaker Nabih Berri’s Amal Movement alone in their quest to proceed with the bid […] It seems Bassil is running out of cards to push for holding the tender. Invoking potential Israeli threats (July 2013), drafting petitions (October 2013) and threatening to proceed with the tender even without the two decrees (Nov-Dec 2013, January 2014), all proved to be unsuccessful. The political class called his bluff. (Click here to read the article)

Bassil insisted that this is the last time he delays the tender, probably encouraged by certain regional and local signs that suggest government formation has been put back on track. However, having a functioning cabinet in place, and adopting the two needed decrees ahead of the April deadline is not guaranteed. It is one thing to agree to form a cabinet based on a certain formula (8-8-8 seems to be the most likely to be adopted: eight ministers for “March 14”, eight for “March 8”, and eight for the President and other non-aligned parties/factions), and a whole other thing to actually agree on the distribution of portfolios. The next battle is about who gets what, and as we have mentioned before, all factions have their eyes on the Ministry of Energy. The debate around the rotation of ministerial portfolios is primarily motivated by a will to control the Ministry of Energy [see “Lebanon – Local politics” in our April 15, 2013 roundup].

–          Companies’ reactions

In informal chats with representatives of a number of shortlisted companies, Middle East Strategic Perspectives did a small-scale survey to examine how they perceived the latest delay. It appears that the majority of these companies, particularly those whose decision to establish a presence in Lebanon was a strategic choice, have not reconsidered their decision yet, despite a perceptible frustration. It also seems that many are relying on a potential political stabilization of the country, regardless of what happens in neighboring Syria. Repeated delays however confirm that country-risk is high. On the other hand, those who decided not to proceed have done so for commercial reasons, or for other considerations.

Lebanon – Petroleum Tax Law:

Nasser Hoteit, the current president of the Petroleum Administration, announced on January 7 that the PA has completed its work on the petroleum tax law. During the press conference organized at the Ministry of Energy on January 8 to announce the postponement of the first licensing round, Caretaker Energy Minister Gebran Bassil listed the completion of work on the petroleum tax law as an example (among many) that shows that work at the Ministry, and at the PA, has not been interrupted, although the tender is temporarily on hold. However, it must be noted that it is still a long way before the petroleum tax law is approved. The text still needs to be discussed and approved by the government.

Lebanon – Italy:

Italian Prime Minister Enrico Letta visited Lebanon on December 14, 2013 and held talks with top Lebanese officials, focusing in particular on defense cooperation. During his visit, Letta announced that Italy will host an international conference to support the Lebanese Army in March 2014. He also said that Italy will increase its assistance to the Army, in terms of training and equipment, to allow it to better conduct its mission, including the protection of its maritime borders and territorial waters.

Italy aims to play a bigger role in the Eastern Mediterranean, driven by concerns over illegal immigration and – equally important – energy considerations. Its influence is expected to grow. It is already present in the region, through NATO forces and a 1,086 strong UNIFIL contingent, including naval forces deployed as part of the UNIFIL Maritime Task Force. Rome is also looking to strengthen its defense cooperation with countries in the region. It is currently negotiating a contract to sell small frigates to the Israeli navy, which is restructuring its capacities with a view to protect its offshore installations. In Cyprus, Italian company, ENI, leading a consortium it formed with KOGAS, was awarded exploration and production rights in Blocks 2, 3 and 9. ENI, one of 12 companies shortlisted as operator, is also eyeing a stake in Lebanese offshore exploration. Several elements could play in its favor. Italy is Lebanon’s first commercial partner in Europe, and partnerships among both countries’ business communities have yielded significant benefits for Lebanese and Italian entrepreneurs well beyond Lebanon and Italy, particularly in Africa and the Middle East, bringing them closer to decision-making circles. In Lebanon, the Italians are, de facto, in competition with the French, long considered Lebanon’s historical partners. The close coordination and cordial relations they have established with various Lebanese factions are an advantage that could prove to be decisive for the Italians.

Lebanon – Surveys:

Two days after the postponement of the first licensing round, the Ministry of Energy and Water awarded US firm NEOS GeoSolutions a contract to conduct aerial surveys to locate possible oil and gas sites onshore. The contract was signed on January 10 by caretaker Energy Minister Gebran Bassil and NEOS GeoSolutions’ Vice President and General Manager for the Middle East & North Africa, Frank Jreij, in presence of the US Ambassador David Hale, who was appointed in August 2013 and holds a good knowledge of Lebanese politics.

The survey will be conducted over an area of 6,000 Km2. Once acquisition is completed, it is estimated that data processing and interpretation would take seven months.

Middle East Strategic Perspectives – Le Commerce du Levant:

Lebanon’s leading business magazine, Le Commerce du Levant, introduced a new “oil & gas” section in partnership with Middle East Strategic Perspectives, starting January 2014.

MESP is managing the 3-page section which includes: (a) two main articles, one focusing on the emerging Lebanese oil and gas sector, and another one keeping an eye on the Eastern Mediterranean; (b) a “Who’s who?” paragraph introducing a key actor animating or influencing the sector; (c) brief Lebanese and regional updates; (d) each month, we will also shed light on one or two quotes, which we believe deserve to be highlighted.

The January 2014 issue includes:

–          Liban: le facteur temps reste essentiel
–          Chypre contraint de revoir sa stratégie d’exportation
–          Who’s who: L’Autorité de l’Energie
–          Brief updates from Lebanon and the Eastern Mediterranean
–         A quote by US Deputy Assistant Secretary of State for Energy Diplomacy Amos Hochstein, and another one by French Ambassador Patrice Paoli.

Le Commerce du Levant, founded in 1929, is Lebanon’s only French-speaking business magazine.

Previous issues:

Lebanon: The Oil & Gas Week, December 09, 2013
Lebanon: The Oil & Gas Week, November 25, 2013
Lebanon: The Oil & Gas Week, November 11, 2013
Lebanon: The Oil & Gas Week, October 28, 2013
Lebanon: The Oil & Gas Week, October 14, 2013

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