The odds are now stacked in favor of there being a treasure trove of hydrocarbons locked under Lebanon’s seabed. Nobody can be certain until the first field has successfully been tapped but it is certainly looking promising. So when the government held the Lebanon International Petroleum Exploration Forum & Exhibition in early July it is no surprise that industry players from far and wide were swarming like bees around the proverbial honey pot.
Representatives from the big guns to the small fry came to Beirut to sniff out what the government had on offer and they had two reasons to be interested. The first is the fact that Lebanon is sitting on the same geographical structures that have already come up trumps for Israel and Cyprus.
Houston-based Nobel Energy has been operating in Israeli waters since 1998 but in recent years has had two massive finds. In 2009 they successfully drilled a natural gas field of 237 billion cubic meters (BCM) and then in 2010 a 453 BCM field was tapped. With the subsequent discovery of a 226 BCM field in Cypriot waters the international oil companies (IOCs) must be salivating at the prospect of what else could be down there.
This needs to be considered in light of the fact that the 2010 United States Geological Survey predicted that the Levant Basin Province — a geological formation in the Eastern Mediterranean extending from Syria to the Sinai — contains 1.7 billion barrels of recoverable oil and 3.5 trillion cubic meters of recoverable gas.
The second carrot dangling in the face of the IOCs is the detailed and comprehensive library of seismic data within the 20,000 square kilometers of deep water in Lebanon’s Exclusive Economic Zone (EEZ), which has been collected by the companies Geco-Prakla, Spectrum Geo and Petroleum Geo-Services (PGS).
The prospective companies’ geological experts use this data to assess if there is actually anything down there and how accessible they anticipate it would be to drill and extract. The findings are promising and suggest a number of unexplored potential hydrocarbon hotspots including the Syrian Arc, the Levant Basin Province and the Levant Margin.
So with an attentive audience of bigwigs in town it was upon the government, and more specifically, the Ministry of Energy and Water (MoEW), to show that it finally has some impetus and momentum to push the sector forward.
“Triggered by the success in Israel and Cyprus we cannot afford to idly sit by,” remarked Fadi Nader, advisor to the energy minister.
The MoEW, however, tripped at the first step. The man at the head of the ministry, Gebran Bassil, had announced triumphantly in the first week of January that the Petroleum Administration (PA) would be named within a month, as the decree approving the bylaws for body had been passed. Come late July and there is still no PA and without a PA the whole progress of the sector is stuck in stasis, as none of the other areas of the Offshore Petroleum Resources Law from August 2010 can be enacted.
The hundreds of delegates were told, of course, that the naming of the PA was just weeks away. However, many of the attendees I spoke to were not exactly filled with confidence, as Lebanon’s reputation for inter-party and inter-sectarian squabbling over who sits where at which table precedes the country.
What was more, the Ministry of Finance did a rather good job of revealing pretty much nothing about the kind of tax regime prospective companies could expect to be subject to — discussions regarding income tax, value added tax, built property tax, stamp and customs duties were at best vague, while the entire presentation had that distinct vacuousness many associate with “a waste of time.”
The ministry representative who had the unenviable job of filling the airtime told the expectant crowd, “in any case the taxation system in the whole of Lebanon is very soon going to be reviewed.” Which is funny because the new budget — the first since 2005 — passed by the cabinet just weeks later, was devoid of anything that resembled a review of the tax system.
Alas, the government regrettably missed a trick; the forum intended to convince industry players to partake in Lebanon’s embryotic energy sector but instead it gave them every reason they needed to question the wisdom of doing just that.
ZAK BROPHY is Executive's economics and policy editor