Lebanon launches its second offshore oil & gas licensing round

The cabinet approved the launching of Lebanon’s second offshore oil & gas licensing round in its latest session on April 4, 2019. Energy Minister Nada Boustani officially announced the launching of the tender in a press conference on April 5.

Five blocks are on offer: Blocks 1 and 2 in the northern part of Lebanon’s Exclusive Economic Zone, Blocks 8 and 10 in the south, and Block 5 in the middle of the EEZ.

As in the first licensing round, interested companies must form a consortium of at least three companies, one of which an operator, to place bids. The deadline to place bids is on January 31, 2020.

The Lebanese Petroleum Administration has recently announced some changes to the process. The tender won’t be preceded by a separate pre-qualification round, as in the first licensing round. The pre-qualification round will be mainstreamed in the process, giving companies more time to consider participating. The evaluation of pre-qualification applications will take place in the first weeks of February 2020, with pre-qualification results expected to be announced on the third week of February. It will be followed with the evaluation of submitted bids, a step that should be completed by mid-March 2020. Negotiations with the provisional winners will then take place, and if results are satisfactory, the Council of Ministers would be expected to approve the licensing by mid-April 2020.

The Energy Minister was keen to show during the press conference that the second licensing round is already attracting interest. Boustani twice pointed out that representatives from Repsol, Lukoil and BP have visited the Ministry’s Data Room. She also claimed that Total and Eni are interested.

As in the first licensing round, four out of the five blocks on offer include areas that are disputed by neighboring countries. One of the objectives behind opening these blocks is to reaffirm Lebanese sovereignty over these areas. Lebanese officials have previously made a distinction between awarding a license for these blocks and conducting operations within the disputed area in the awarded block.

Note that when the first licensing round was launched in 2013, the LPA probed the opinion of pre-qualified companies to see which blocks they were mostly interested in. Out of Lebanon’s 10 offshore blocks, Block 5 came in fourth position, Block 1 in the fifth position, Block 8 in the eighth position, Block 2 in the ninth position and Block 10 was last. But this was before companies recalibrated their interest in the region post-Zohr and started taking into consideration carbonate limestone formations.

So, among the five blocks on offer for the second licensing round, Block 5 received the highest number of votes from companies in 2013. It also has the advantage of not including a disputed area.

On the regulatory front, Lebanon has opted for stability. The legal framework governing the tender is largely similar to the framework introduced for the first licensing round, with a few amendments. The pre-qualification criteria set in the first licensing round were deemed too strict at the time. Pre-qualification criteria for the second round were slightly loosened to encourage more companies to participate. Operators, for example, are now required to have petroleum developments at water depths exceeding 300m (previously set at 500m). It also appears that the loophole that was inserted in the initial pre-qualification decree – which allowed companies with no prior experience in the sector to qualify by partnering with companies that meet the criteria – was removed.

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