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Nazarian to delay gas auction again

Spectrum engineers drilling a surface in Batroun area to determine if there's oil underneath. (The Daily Star/Mohammad Azakir)

BEIRUT: Lebanon will reschedule the offshore gas auction again after the Cabinet failed to discuss two decrees setting the number of blocks and the share of the government from untapped wealth, Energy and Water Minister Arthur Nazarian said Wednesday.

“The prime minister has not yet put the decrees on the agenda, although most ministers have reviewed these decrees and put their remarks on them. In view of this situation, we are compelled to delay the auction again. The date of the new round will be decided once I get the recommendation from the Petroleum Administration,” Nazarian told The Daily Star.

The auction had been scheduled for Aug. 14 of this year.

But most observers were expecting the minister to delay the auction due to the political and security tension in the country and the spillover of the Syrian war. This is the third time that the auction has been delayed.

Energy experts and international oil companies have repeatedly warned against further delays of the auction. They note that Israel, Cyprus, Greece, Angola and Montenegro – all of which began auction processes at around the same time as Lebanon – have already awarded contracts and started oil exploration off their coasts.

The minister said the auction would be pushed for at least two or three months to give international oil companies more time to review the conditions of the auction.

“We need time to review the decrees and allow the bidding companies ample time to submit their offers,” Nazarian argued.

The minister stressed that if the matter was up to him, he would have passed the decrees months ago.

He added that the number of blocks that will be auctioned off have not been decided yet.

“We first need to pass the decrees and then the ministers will decide on the number of blocks that will be auctioned off,” Nazarian said.

He said that some political parties in the Cabinet may not be too keen to speed up the approval of the decrees or hold the auction on time.

“The ministerial committee headed by Prime Minister Tammam Salam, which was formed to review the decrees, had some remarks about some articles in the decrees, and some ministers have brought their own teams to assess these clauses. Some of the ministers wanted time to comprehend the legal and technical issues,” Nazarian said.

He insisted that despite the postponement of the auction, many international oil companies were still interested in tapping Lebanon’s oil and gas wealth.

“We are still getting inquiries from new international oil firms because they know that Lebanon has abundant quantities of gas and oil off its coast. Some of the companies which prequalified in the first round are now asking to participate in the bidding. As long as the prices of oil and gas are high, the oil companies will surely take part in the auction in Lebanon,” Nazarian said.

However, industry sources said that most of the oil firms which prequalified in the first and second rounds have decided to invest the money they allocated for exploration in Lebanon in other countries which have promptly passed decrees and launched auctions on time.

Nazarian declined to estimate the gas wealth off the coast but assured that the quantities were more than sufficient. The Lebanese government has obtained 14,012 kilometers of 2-D seismic data and 15,176 kilometers of 3-D seismic data, covering more than two-thirds of the Lebanese offshore area.

Former Energy and Water Minister Gebran Bassil has estimated the volume of natural gas off the Lebanese coast at 96 trillion cubic feet and oil at 865 million barrels.

David Rowlands, chief executive of the British geological company Spectrum, which conducted the offshore seismic surveys, implied in September 2012 that around 25 trillion cubic feet of gas and significant deposits of oil were located in Lebanon’s waters – and perhaps even more.

Out of the 52 companies that applied for prequalification, 46 were accepted out of which 12 can bid as operators and 34 as non-operators.

The Petroleum Administration approved a map dividing offshore Lebanon into 10 blocks covering around 17,900 square kilometers (excluding a coastal buffer zone of 2 nautical miles).

The energy and water minister has submitted this map to the Cabinet for approval. The suggested 10 blocks disregards Israeli claims to a portion in the south of Lebanon’s EEZ.

 
A version of this article appeared in the print edition of The Daily Star on August 07, 2014, on page 5.

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Summary

Lebanon will reschedule the offshore gas auction again after the Cabinet failed to discuss two decrees setting the number of blocks and the share of the government from untapped wealth, Energy and Water Minister Arthur Nazarian said Wednesday.

The minister said the auction would be pushed for at least two or three months to give international oil companies more time to review the conditions of the auction.

Some of the ministers wanted time to comprehend the legal and technical issues," Nazarian said.

He insisted that despite the postponement of the auction, many international oil companies were still interested in tapping Lebanon's oil and gas wealth.

Nazarian declined to estimate the gas wealth off the coast but assured that the quantities were more than sufficient.

Former Energy and Water Minister Gebran Bassil has estimated the volume of natural gas off the Lebanese coast at 96 trillion cubic feet and oil at 865 million barrels.


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