Minister of Energy and Water Cesar Abi Khalil announced on April 26 the list of companies qualified to take part in Lebanon’s first licensing round. The announcement came two weeks past the deadline initially set on April 13, 2017 (click to see the roadmap), due to last minute requests from a number of applicants.
A second pre-qualification round was organized between 02 February and 31 March 2017. Applicants included: ONGC Videsh Limited; PJSC Lukoil; Sapurakencana Energy Sdn Bhd; Sonatrach International Petroleum Exploration & Production Corporation; Qatar Petroleum International Limited; Advanced Energy Systems (ADES) S.A.E; Petropars LTD; JSC Novatek; Vega Petroleum Limited/Edgo Energy Limited/Petroleb SAL; New Age African Global Energy.
All of them qualified except: Advanced Energy Systems (ADES) and Vega Petroleum Limited/Edgo Energy Limited/Petroleb.
ONGC Videsh, which qualified in 2013 as non-operator, upgraded its status to operator this year. Lukoil sought to upgrade its status to operator but failed. It remains qualified as non-operator.
All of the companies that qualified in 2013 remain qualified, whether they updated their information or not. Those that didn’t and plan to place a bid are required to update their information.
Below is the full list of companies that pre-qualified for the first licensing round, including 13 operators and 38 non-operators:
Operators: Petrobras*; Maersk*; Total*; Eni*; INPEX*; Petronas*; Shell*; Statoil*; Repsol*; Anadarko*; Chevron*; ExxonMobil*; ONGC Videsh***
Non-Operators: Santos*; OMV*; Suncor*; INA*; GDF-Suez (Engie)*; MOL Group*; Petroceltic*; Edison*; JAPEX*; JX Nippon*; Mitsui*; KNOC*; KOGAS*; KUFPEC*; CC Energy*; Rosneft*; PTT*; TPAO*; Crescent-Apex Gas*; Crescent Petroleum*; Dana Gas*; Dragon Oil*; Mubadala*; Cairn Energy*; Cairn India*; Dana Petroleum*; Genel Energy*; Heritage Oil*; SOCO*; Geopark-Petroleb*; Marathon*.
PJSC Lukoil*; Sapurakencana Energy Sdn Bhd**; Sonatrach International Petroleum Exploration & Production Corporation**; Qatar Petroleum International Limited**; Petropars LTD**; JSC Novatek**; New Age African Global Energy**.
* Qualified in 2013
** Qualified in 2017
*** Upgraded its status to operator in 2017
Interested companies have until September 15 to place bids. According to the Offshore Petroleum Resources Law, the minimum number of “right holders” is three. To place an offer, companies have to form a consortium of three companies, one of which is the operator.
Blocks 1, 4, 8, 9 and 10 are on offer. Parts of the southern blocks fall within a zone that is disputed by Israel. On April 24, Energy Minister Cesar Abi Khalil mentioned in an interview that a U.S. delegation is expected in Lebanon soon to resume mediation efforts to settle the maritime border dispute.
A few quick remarks:
New Arab companies
There was some disappointment in 2013 with what was perceived as a timid Arab participation in the pre-qualification round, although a Kuwaiti company and four Emirati companies were among the 46 that pre-qualified. The disappointment was relayed by a number of politicians, so much so that at one point, the organization of a second pre-qualification round opening the door to new companies, appeared to be a pre-condition to unblocking the sector. The presence of Sonatrach and Qatar Petroleum might please those who were disappointed in 2013.
A new Iranian company
In 2013, the only Iranian company to apply – National Iranian Drilling Corporation – failed to qualify. This year, Petropars applied and qualified.
No Russian operator
three Russian companies pre-qualified in 2013 for the first licensing round. All of them sought a non-operator role (and some of them partnered with western operators), which came as a surprise for some of those expecting a more visible presence for Russian companies, and behind them, the Russian State. In the latest pre-qualification round, one of these companies, Lukoil, sought to upgrade its status to operator, without success.
Petroleum tax law
According to the roadmap, companies have until September 15 to submit their bids. Five months to the deadline, and the petroleum tax law has yet to be approved by the Parliament. Theoretically, existing legislation apply to petroleum activities. But does it send the right signals to investors who know that a new tax law is under consideration? The Exploration & Production agreement includes a stability clause, but is the wording enough to reassure investors? Not to mention the other aspects of the petroleum tax law, beyond CIT, such as the incentives that are meant to attract investors.
The Parliament can still pass the law in the coming weeks, but it should be kept in mind that it can no longer hold sessions until May 15, after President Michel Aoun postponed Parliament’s meetings by one month, based on Article 59 of the Constitution, and that its current term will end on June 21. It is expected the Parliament will extend its mandate for several months since it is increasingly unlikely parliamentary elections will be held on time in May 2017.
MESP will provide further details and analysis in a special edition of its Lebanon Oil & Gas Report, including a special focus on two pre-qualified companies. More companies will be featured gradually in our subsequent reports.
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