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Lebanon's plans for gas boom falter

Feb. 6, 2013 at 2:06 PM   |   Comments

BEIRUT, Lebanon, Feb. 6 (UPI) -- Lebanon's dysfunctional government desperately wants to start awarding contracts for natural gas exploration in the eastern Mediterranean and start a process that could rescue a steadily declining economy.

But Lebanon is crippled by centuries-old sectarian rivalries that could derail the process of extracting the estimated 25 trillion cubic feet of gas that lies beneath Lebanese waters while neighboring Israel and Cyprus press ahead with developing gas booms that will transform their economies.

The pre-qualification process for international companies seeking exploration licenses was to begin Feb.1 after many months of delays because of political infighting between the leading sects for controlling interests in the enterprise.

If it did, nobody noticed it. That probably has a lot to do with the fact the Council of Ministers hasn't issued a decree authorizing the bidding process, in which Energy Minister Gebran Bassil claims 40 international companies are ready to participate.

"When it eventually does, it will in theory initiate a bidding timetable insulated from the bickering and volatility of Lebanese politics and should see contracts being awarded in March next year," the Financial Times reported.

"But analysts warn that many complex, politically sensitive decisions still lie ahead."

The endemic sectarian rivalries that have plagued Lebanon, even when it was under Ottoman rule that ended after World War I, infect just about every facet of life in the tiny country and regularly trigger violence, the 1975-90 civil war being the extreme example.

And the prospective gas boom is no exception. Every sectarian leader wants a cut of the action.

A few weeks ago, the government appointed a six-member Petroleum Administration, comprising representatives of the main sects, after months of wrangling. It's supposed to prepare the technical and legal work before negotiations with the foreign companies commences.

Demarcation disputes with Israel, with which Lebanon is still technically at war and Cyprus have complicated the entire exploration process.

But growing political and sectarian polarization, aggravated by the civil war in neighboring Syria that's approaching its third year, has virtually paralyzed recent governments, to the point that no national budget has been passed since 2005.

Bassil has repeatedly assured the nation that the selection process will be finalized by March 2014 with exploration expected to start in 2017.

Cesar Abi Khalil, an energy ministry adviser, insists the exploration and production agreement, or EPA, model will be approved by the Council of Ministers and bidding will begin May 2.

There's supposed to a parliamentary election in June, although the parties cannot agree on an electoral law since all want to secure the greatest advantage for themselves and their constantly changing alliances.

But Abi Khalil says the likelihood of prolonged difficulties in actually forming a government won't interfere with the process of awarding exploration blocks to foreign companies, all of which have to have Lebanese partners.

It's not known which blocks are likely to be put up for auction but these are likely to be in areas off southern Lebanon, which abut Israel's big Leviathan field discovered in 2010.

Leviathan contains an estimated 16-20 tcf. The Tamar field to the south holds 8.4 tcf.

Seismic surveys in Lebanese waters have concentrated on the southern zone that's believed to be an extension of Leviathan's gas-bearing strata. This includes a triangular 330-square-mile zone that's the center of the dispute with the Jewish state.

The prize is great. The U.S. Geological Survey reported in 2010 that the deep-water Levantine Basin, which encompasses Syria, Lebanon, Cyprus, Israel and the Gaza Strip, contains 122 tcf, plus 1.7 billion barrels of oil.

Extracting all of this will require an investment of tens of billions of dollars.

That's a problem for Israel and possibly for Lebanon, too.

Major oil companies have shied from investing in Israel's energy bonanza because of the decades-old fear of offending the Arab world where about one-fifth of the world's oil lies.

Lebanon's propensity for violence -- its own or somebody else's -- could also drive off potential investors.

The Jamestown Foundation, a Washington think tank, observed in January that for Lebanon "in the foreseeable future, the potential political conflict over the exploitation of energy resources ... is most likely to follow the predictable pattern of conflict" between the main pro-Syrian and anti-Syrian blocs that are currently the country's key protagonists.

Topics: Gaza
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