An international oil expert says the market conditions and stability of prices could determine the fate of Lebanon’s offshore gas licensing round this year.
“The prices of oil are better than they were three months ago. But there is still too much oil in the world. So at the moment oil companies don’t have the need or the desire to increase their portfolio and this includes Lebanon. However, if the prices remain stable or surge then these companies would take part in the offshore gas licensing round this year,” the London-based expert told The Daily Star on condition of anonymity.
On Jan. 4, the Lebanese Cabinet approved two long-awaited decrees that cleared the way for the first licensing round of offshore oil and gas exploration.
The two decrees define the blocks and specify conditions for production and exploration tenders and contracts.
Energy and Water Minister Cesar Abi Khalil said in a news conference that the initial step is to offer five of the 10 existing blocks for tender.
In December, OPEC announced that it would cut output by about 1.2 million barrels per day by January.
This is the first announced output cut by the group in eight years. Saudi Arabia was to bear 40 percent of the cuts, with Iraq reducing output by nearly 20 percent. Nigeria and Libya were exempted from the cuts.
Non-OPEC members such as Russia also reduced oil production to improve prices which had fallen drastically over the past three years.
The expert stressed that attracting foreign oil companies to Lebanon again depends on the market conditions.
He nevertheless said the approval of the two decrees was great news for Lebanon although they were three years late in passing them.
“I advise the government and the [Lebanese] Petroleum Administration to take things very slowly. The LPA must reassure the oil companies that Lebanon has no intention to cancel the bidding and everything is in line,” the expert added.
He said that if everything went according to plan, the licensing round in Lebanon could be a success.
“The LPA must give the oil companies some kind of guarantees. But I think that the Lebanese government should wait until the prices of oil go up,” the expert said.
On April 2013, Lebanon launched the prequalification round for offshore gas exploration.
The Energy Ministry announced at that time that out of 52 companies from 25 countries that sent applications, 46 were qualified.
The ministry has also announced that out of 16 companies that applied for operator status, 12 qualified. Those were ExxonMobil, Shell, Petrobras, Chevron, Statoil, Inpex, Eni, Maersk, Anadarko, Repsol, Petronas and Total.
One of the major advantages which Lebanon has over some of the countries in the region, is that is has nearly completed all of the 3-D seismic survey of Lebanese waters.
The data collected from this survey was sold to the oil companies.
The expert believes that the fall in oil prices would lower the cost of oil and gas exploration in Lebanon’s exclusive economic zone.
He added that if the companies won contracts this year, the actual drilling wouldn’t take place until at least 2025.
The expert said east Asia is a potential gas and oil market for Lebanon.
