Lebanon: The Oil & Gas Report, April 07, 2014

Lebanon: Tender delayed… pending a broader political consensus?

Lebanon’s first licensing round will be delayed for the fourth time. The deadline to submit bids was previously set on April 10, 2014, but since the cabinet has not approved the two decrees defining offshore blocks and specifying contract terms yet, the tender is still on hold.

The cabinet decided on April 2 to establish a cross-party/sect ministerial commission to “study” the decrees, which were drafted over a year ago [see Flash: Lebanon fails once again to approve missing oil & gas decrees]. The move was seen as the latest attempt to stall the process until a broad political (and by extension sectarian) backing is found. Stalling is not yet synonymous with halting, as several political factions would like to see some progress on this front. These include the Free Patriotic Movement and its allies within the Change & Reform bloc, and Hezbollah. President Michel Slaiman, whose term expires in May 2014, is looking for an achievement before leaving office. The commission was requested to submit its preliminary findings as early as the next cabinet meeting on April 8, which suggests there is no intention yet to shelve the project, as is sometimes the case when establishing a ministerial commission.

The members of the commission (see list here) do not have the necessary qualifications or expertise to challenge the provisions of the draft decrees. The debate is much more political in nature than technical. Much of it revolves around the number of blocks to open up for bidding, with some, led by Speaker Nabih Berri’s Amal Movement, demanding opening up all 10 blocks, and others satisfied with the Energy Ministry’s initial decision to open five blocks (1, 4, 5, 6 and 9). Berri’s camp insist that opening up all blocks is the best way to affirm Lebanon’s sovereignty over all its Exclusive Economic Zone and counter Israel’s claims to certain parts along the border. The fact that only three blocks run along the Lebanese-Israeli border suggests that there might be other considerations, unrelated to Israel, that motivate Berri. We have noted a certain disappointment among Berri’s circles that certain promising blocks were left out of the bid.

MESP also does not exclude other political motives for stalling the process. Many seem to be equating being left out with the risk of future political/business marginalization and are attempting to secure certain guarantees.

Technically, none of these issues are related to the two decrees that need to be passed. But it’s a way for some to stall the process until a political agreement is reached.

The decision to postpone the passing of the decrees comes at a time foreign/diplomatic interest in Lebanon’s energy sector, and particularly in the offshore tender is running high. In the past few days alone, Energy Minister Arthur Nazarian received the ambassadors of South Korea, Norway, France, Russia, Great Britain, Austria, India, Cyprus, in addition to the U.S. ambassador and Deputy Assistant Secretary for Energy Diplomacy Amos Hochstein, with the first licensing round at the center of discussions.

As far as the companies are concerned, previous delays were seen as inevitable with the absence of a fully functioning government, and more or less tolerated. But now that a new cabinet is in place, as a result of a broad political consensus, repeated delays will force many of them to put their interest on hold.


Amos Hochstein in Beirut, backed by a smart communications strategy… but differences with Berri persist

U.S. Deputy Assistant Secretary for Energy Diplomacy Amos Hochstein arrived to Lebanon on a 2-day visit on March 31. The timing of the visit is not a coincidence. It comes just a few days after Tammam Salam’s government gained the Parliament’s confidence, marking the first time Lebanon is run by a fully functioning government in about a year. The timing could have been “luckier”: Hochstein arrived to Beirut on the day the cabinet was supposed to discuss the two missing oil and gas decrees. But sharp disagreements during the meeting (over issues not related to the decrees) and an over-crowded agenda relegated the discussion to the following meeting on April 2, during which the cabinet decided to form a commission to study the decrees before approving them.

Hochstein, who is pursuing his mediation efforts between Lebanon and Israel to settle the maritime border dispute, met with President Michel Slaiman, Prime Minister Tamam Salam, Minister of Foreign Affairs Gebran Bassil, Minister of Energy and Water Arthur Nazarian, former Prime Minister and head of Future Parliamentary Bloc Fouad Siniora, and UN Special Representative to Lebanon Derek Plumbly.

One name is missing on that list: Speaker Nabih Berri, who preferred to dispatch his media advisor Ali Hamdan. We believe Berri’s busy schedule (Parliament was, and still is, in session) is not the only reason for not meeting the American diplomat. There is always time for side meetings, and, more importantly, if Berri did not intend to convey a message to Hochstein, he would have sent one of his close aides to the meeting, and not a media advisor. It is not clear if Berri was signaling dissatisfaction with

(1) Hochstein’s mediation efforts: if this is the case, Berri’s position would represent that of the Shiite duo as a whole, which includes Hezbollah,


(2) Hochstein’s insistence to move forward with the offshore tender: in this case Berri’s position does not represent the position of Hezbollah.

It’s worth to note though that during his visit, Hochstein seems to have made a step towards meeting one of Berri’s demands regarding the border dispute and that is to involve the United Nations [see Lebanon/Israel – Maritime border dispute, in our December 09, 2013 report] in one form or another (Assafir, 02/04).

Hochstein’s efforts were backed by an extensive communications strategy during his visit, designed to convey his message to the widest possible audience: the American diplomat gave interviews to (1) The Daily Star, an English language newspaper, clearly leaning towards the March-14 alliance; (2) Assafir, one of the leading Arabic language newspapers, known for its Arab nationalist tendencies and committed stance against Israel, with a readership leaning mostly towards the March-8 alliance; (3) Future TV, owned by the Hariri family, with a viewership that struggles to reach beyond the usual audience of Hariri’s Future Movement. However, and since Hochstein’s interview was followed by an interview with Foreign Affairs Minister Gebran Bassil, the program was aired a couple of days later on (4) OTV, the Free Patriotic Movement’s TV channel, on the completely opposite side of the spectrum, therefore wining Hochstein an ever wider audience.

Hochstein likes to focus on four ideas in all his media appearances. (1) Lebanon, as a country, and the Lebanese, as a people, have an interest in exploiting the country’s offshore resources. In order to make the most out of these resources, (2) Lebanon should ensure a sound environment to attract foreign investments (including from U.S. companies), and that requires (3) containing tension, particularly tension resulting from unsettled border disputes. The Lebanese authorities should also (4) speed up the process and proceed with the tender, because time is an important factor, and Lebanon is lagging behind.

The communications aspect of his visit was certainly a success. It is rare that a foreign diplomat’s visit receives such a wide and targeted coverage. But the objective of Hochstein’s visit is to strengthen energy cooperation, and his communications strategy can only be deemed effective if it helps towards reaching that objective. For his next visit, MESP recommends arranging meetings with representatives of the business community, which holds great influence on the political class.


Previous issues:

Lebanon: The Oil & Gas Report, March 24, 2014
Lebanon: The Oil & Gas Report, March 10, 2014
Lebanon: The Oil & Gas Report, February 24, 2014
Lebanon: The Oil & Gas Report, February 10, 2014
Lebanon: The Oil & Gas Week, January 27, 2014

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