BEIRUT: International oil companies are frustrated by the failure of politicians to form a Cabinet to designate the offshore gas and oil blocks for exploration, a senior oil firm executive told The Daily Star Wednesday.
Some of the oil firms have even pulled out of their bids to extract gas from Lebanon, and others may follow suit if the political stalemate continued, the executive added.
“I can honestly tell you that many of the oil firms are very frustrated by the inability of politicians to form a Cabinet. This frustration prompted some of the firms to withdraw their prequalification bidding, and I am afraid others may do the same if the political crisis continues,” the executive of a major oil industry company told The Daily Star on condition of anonymity.
The executive highlighted the failure of Lebanon authorities to announce the oil and gas blocks off the Lebanese coast that the companies were supposed to bid on.
The first licensing round began in May, with the blocks available for bidding scheduled to be announced June 30, however the failure of Prime Minister-designate Tammam Salam to form a new Cabinet to approve the blocks has stalled the process.
On April 18, a group of 46 firms qualified to bid on the first round of licenses to explore Lebanese offshore gas fields, the energy minister said.
“This is a new step forward toward the entry of Lebanon into the world of oil,” Gebran Bassil said at that time.
Of the 52 companies that entered the prequalification process, 12 qualified as potential operators, and another 34 as nonoperators able to participate indirectly in the exploitation of Lebanon’s offshore gas reserves.
“Some the bidding companies have moved their operations to other countries. We can’t really blame them. They have made a huge investment already in Lebanon and yet they did not see real cooperation. I don’t blame the Petroleum Administration because they are doing a great job. However, politics have apparently spoiled everything,” the source stressed.
A media source close to now-caretaker Energy Minister Bassil told The Daily Star that the minister has urged both the president and caretaker Prime Minister to hold an extraordinary session to pass two important decrees which will allow the Petroleum Administration to announce the blocks that will be earmarked for exploration by the companies.
“Bassil sent memos to both the president and prime minister, but he did not receive any answer. We checked with legal experts, and they all agreed that the caretaker Cabinet has the right to hold an extraordinary session to pass the two decrees,” the media source explained.
The oil executive stressed that the investment in each block would cost the companies around $180 million and for this reason the firms cannot wait forever if they do not know when the blocks will be announced.
“We are taking about $600 million in investments and these investments cannot wait for a long time. Some of the companies have moved these investments to countries like Brazil and Angola,” the source said.
He emphasized that the geological structures in Lebanon were excellent for gas drilling.
“The companies do not have to drill deep in the Lebanese waters to extract gas. The process seems to be easier than other geological structures,” the source said.
Companies have stopped necessary preparations for the next bidding round, including ordering data about the hydrocarbon structures and compositions off the Lebanese coast.
“This indicates that oil companies are not taking Lebanon very seriously due to the political crisis. The main problems facing these firms are political and not geological,” he said.“Would you invest $180 million in a block under these circumstances?” the source asked in frustration.
But he assured that once the companies notice seriousness on the part of the politicians to sort out the problem of the blocks, they would definitely return to Lebanon’s bidding process.
He argued that Lebanon had much more than 27 trillion cubic feet of gas off the Lebanese coast, saying that recent surveys indicated high prospects for additional potential reserves.
“I hope the Lebanese can end their differences and form a Cabinet as soon as possible to encourage the firms to continue working in this country,” the executive said.
He echoed the views of other firms that Lebanon also had the potential of oil and gas onshore, pointing to the ongoing survey and assessment of the country’s land for oil reserves.
“The geological structure in Lebanon is similar to Syria, which has large quantities of oil,” the executive said.