Oil & Gas Prospects in Lebanon - 2015: A Promising New Sector

Oil & Gas Prospects in
Lebanon - 2015
A promising new sector

Content
1. Lebanon main economic indicators
2. Executive summary
3. Hydrocarbon prospects
4. Offshore Petroleum Resources Law, OPRL
5. Major Mile Stones
6. Challenges and Opportunities
7. Conclusion
8. References

Content
1. Lebanon main economic indicators
2. Executive summary
3. Hydrocarbon prospects
4. Offshore Petroleum Resources Law, OPRL
5. Major Mile Stones
6. Challenges
7. Conclusion
8. References

Lebanon Main Economic Indicators
Source: The World Bank
Lebanon is one of the world’s most energy-import-dependent countries
and spends 15% of its GDP on fuel import

Executive Summary of the presentation
• The presentation will outline:
• Recent oil and gas discoveries in the
Levantine region.
• Legal and institutional framework for the
exploration of offshore Lebanon.
• Time frame including the ongoing licensing
and bidding phases.
• Assessment of challenges and opportunities.

• It covers 83,000 km2
• Which engulfed Syrian,
Lebanese, Cypriot and,Israel,
waters.
• USGS estimated (2010):
• 1.7 Billion barrels of
recoverable oil.
• 122 trillion cubic feet of
recoverable gas.
The Levant Basin Potential
Eastern Mediterranean Basin
Source: Lebanese Petroleum Administration

Production History of the Levant Basin
•Production began in 2004
from the Mari B field
•Tamar field discovered in
2009; on production March
2013
•Leviathan field discovered in
2010
•Aphrodite/Block 12 – Cyprus
discovered in 2011
Source:
South Levant Basin

It is Real !
•Offshore seismic surveys were made by
the Norwegian company, Petroleum Geo
Services and the British company
Spectrum between 2007 and 2013
•The 2-D & 3-D Seismic surveys have
indicated a high probability of
considerable reserves in Lebanon’s
Exclusive Economic Zone (EEZ)
•The interest of major IOCs in Lebanon is
indicative of the potential Offshore
Lebanon
•Lebanon has most promising EEZ in the
Levantine Basin.
Lebanese offshore area, EEZ covers 22,700 km2

Seismic
data
oﬀshore
Lebanon
acquired
by:

•Geco
Prakla
(available
at
the
Petroleum
Administra>on)

•Spectrum
(available
via
Spectrum)

•PGS
(available
via
PGS)

How Much Lebanon Have ?
• Estimated gas reserve:
• 25 TCF (2012 Spectrum)
• 96 TCF (2013 Ministry of Energy)
• Estimated Oil Reserves:
• 675 million barrels (2013 Beicip-
Franlab)
• 865 million barrels (2014 Ministry
of Energy)
http://www.economist.com/blogs/pomegranate/2013/12/oil-and-gas-lebanon

How Much Lebanon Have ?
• Lebanon has the largest reserve
in the Levantine Basin according
to MoEW
• Considering gas prices at
around US $5.00 per 1000
cubic feet, gas resources’ worth
would vary between $125
billion to $480 billion
• Considering oil prices at around
US $55 per barrel, oil
resources’ worth would vary
between $32 billion and
$48 billion. Ofﬁcials estimate the value of Lebanon’s calculated gas
reserves offshore to be between $300 billion – $700 billion,
although the numbers are speculative and vary greatly.
ً‫ا‬‫تريليون‬ 80‫و‬ ,‫األقل‬ ‫على‬ ‫الغاز‬ ‫من‬ ‫مكعب‬ ‫قدم‬ ‫تريليون‬ 25 ‫نحو‬ ‫ياغي‬ ‫ربيع‬ ‫النفطي‬ ‫الخبير‬ ‫بحسب‬
‫قدم‬ ‫تريليون‬ ‫كل‬ ‫فان‬ ‫بسيط‬ ‫ بحساب‬ .‫وجوده‬ ‫تأكد‬ ‫اذا‬ ‫الخام‬ ‫النفط‬ ‫من‬ ‫برميل‬ ‫مليار‬ 1.5‫و‬ ,‫األكثر‬ ‫على‬
‫فان‬ ,‫تريليونا‬ 25 ‫الغاز‬ ‫من‬ ‫لبنان‬ ‫نصيب‬ ‫كان‬ ‫واذا‬ ,‫دوالر‬ ‫مليار‬ 12 ‫بنحو‬ ‫قيمته‬ ‫تقدر‬ ‫الغاز‬ ‫من‬ ‫مكعب‬
.‫دوالر‬ ‫مليار‬ 960 ‫تتجاوز‬ ‫فالتقديرات‬ ً‫ا‬‫تريليون‬ 80 ‫كانت‬ ‫اذا‬ ‫أما‬ ,‫دوالر‬ ‫مليار‬ 300 ‫بنحو‬ ‫تقدر‬ ‫ثروته‬

What our neighbors have ?
• Cyprus: 60 TCF of gas could be
found in its EEZ
• Israel: 35 TCF of gas could be
found in its EEZ (Leviathan ﬁeld
22 TCF)
• Syria: Signed a 25 year deal with
Soyuzneftegaz controlling
interest for oil and gas in its
EEZ
• Palestinian National Authority
awarded Gaza offshore area to
British Gas (1999)

Lebanon Boundaries Issues
• Lebanon and Israel both
claim ownership over a
possibly resource rich
860 km2 near Lebanon
Southern boarder.
• Lebanon considers Point
23 as the southern
western limit of its EEZ,
while Israel considers
Point 1 (17 km north of
point 23)
Lebanon’s calculations are based on the internationally (UNCLOS)
recognized equidistant method.
Note that Israel does not follow the principles set out by UNCLOS
UNCLOS: United Nations Convention on the Law Of the Seas

Lebanon Boundaries Issues
• Lebanon signed an
Agreement on the
Delimitation of its Exclusive
Economic Zone (EEZ) with
Cyprus in January 2007
• Despite the formation of a
committee of Cooperation
between Lebanon and Syria
for Oil Exploration in 1990,
land and sea borders
between both countries
have not been delineated.
Source: Oxford Institute for Energy Studies

Offshore Petroleum Resources Law, OPRL (132/2010)
• Modern and takes into account best international practice.
• It provides the legal and institutional framework for the exploration
and exploitation of offshore oil and gas resources.
• It stipulates that any contract with energy companies will be based
on an Exploration and Production Agreement (EPA).
• It strengthen transparency and accountability.
• The proﬁt split is based on the R-Factor* and the Cost Recovery
parameters. Contracts will be awarded to companies (three at least)
offering the best return to the government, i.e. with highest R-Factor.
• The government’s share (Royalty and Proﬁt oil) is to be placed in a
Sovereign Wealth Fund (SWF)
* An R-Factor is the ratio of cumulative receipts from the sale of petroleum to cumulative expenditures

• It has big emphasis on the local content.
Source Lebanese Petroleum Administration

Source Lebanese Ministry of Energy and Water
The model contract has to be approved by the Council of Ministers

• In April 2012 Decree no. 7968/2012 was
issued establishing the Lebanese
Petroleum Administration (LPA) as the
body responsible for the management,
monitoring, and supervision of petroleum
activities, including the issuing of
licenses and the implementation of
agreements. handle functions stipulated
by the OPRL.
• In November 2012, the cabinet of
ministers ofﬁcially appointed the six
members of the PA. This nomination
enabled Lebanon to proceed with its ﬁrst
round of offshore oil and gas licensing.
http://www.lpa.gov.lb
Address
Lebanese Petroleum Administration
Marfaa, 200 Building – Third Floor
Georges Akouri Street
Downtown
Beirut, Lebanon
Tel/Fax: +961 1 998 780
info@lpa.gov.lb

Petroleum Administration, PA Organization Chart

Petroleum Administration’s board members
• The Strategic Planning Unit directed by
Walid Nasser (Greek Catholic).
• The Technical and Engineering Affairs Unit
directed by Dr. Nasser Hoteit (Shiite).
• The Geology and Geophysics Unit
directed by Wissam Chbat (Maronite).
• The Legal Affairs Unit directed by Gaby
Daaboul (Greek orthodox).
• The Economic and Financial Affairs Unit
directed by Wissam Zahabi (Sunni).
• The Quality, Health, Safety and
Environment (QHSE) Unit directed by
Assem Abou Brahim (Druze).
The PAA is appointed for a term of six years
with a yearly rotating presidency. Gaby Daaboul, Head of Legal Affairs Department, took
ofﬁce as President of the Petroleum Administration
effective 4 December 2014 for a period of one year.

Petroleum Administration’s Responsibilities
•Promote
the
poten>al
petroleum
resources

•Evaluate
the
qualifica>ons
and
capabili>es
of
bidders

•Prepare
invita>ons
to
bid,
specifica>ons,
relevant
permits

and
agreements

•Support
in
nego>a>on
of
the
terms
of
agreements

•Manage,
follow
up,
supervise,
and
monitor
all
petroleum

ac>vi>es

•Evaluate
plans
for
field
development,
petroleum

transporta>on,
decommissioning,
and
removal
of
facili>es.

•Manage
the
data
associated
with
the
petroleum
ac>vi>es.

•Handle
and
manage
the
petroleum
register.

I
PLANNED TIME FRAME
Pre-Qualiﬁcation for the First License Round is now closed.
If all goes well
TIMELINE & MAJOR MILE STONES

DRIFTED TIME FRAME
The Council of Ministers (Government) has so far failed to approve the decrees indispensable to launching the ﬁrst bid round !

• Two decrees that are essential for tendering Lebanon’s offshore acreage needed to be
approved by the Council of Ministers. These decrees are:
1. One would delimit Lebanon’s territorial sea and exclusive economic zone,
an awkward matter as some blocks straddle a disputed area between Lebanon
and Israel.
2. The other decree would stipulate the provisions of future Exploration and
Production Agreements (EPA). The EPA determines the way in which future
revenues are to be shared between the state and the investors that provide
capital, technology, and expertise. The draft decree has been criticized,
especially regarding two key fiscal parameters — the cost recovery and
profit-sharing provisions — as well as the minimum profit-sharing parameter,
on which investing consortiums may bid.
What is the Problem?

The Minister of Energy and Water, Mr. Arthur
Nazarian, issued decision number 3 dated 8
August 2014, announcing that the deadline to
submit bids for the ﬁrst licensing round has
been extended from 14 August 2014, to a
maximum period of six months from the date
of the adoption of the two decrees related to
block delineation, and the tender protocol and
the model exploration and production
agreement (EPA).
Submission of Bids: Up to 6 months
Bid Evaluation: Up to 2 months
Award: Up to 4 months
The Minister of Energy and Water, Mr. Arthur Nazarian

Block Delineation
A total of ten offshore exploration blocks, still needs the Council of Ministers approval.
Open for bidding within the ﬁrst licensing round.

Subject
to
Council
of
Ministers’
Approval

Nominated
Blocks
for
Bidding

• On February 15, 2013, the Lebanese
Petroleum Administration initiated the
first offshore licensing round.
• On March 30, 2013 fifty two companies
applied to prequalify to the first licensing
round for hydrocarbon exploration
within the Lebanese offshore EEZ.
• On April 18, 2013 the names of the
prequalified companies were announced
First Offshore Licensing Round
Note: Pre-Qualification for the First License Round is now closed.

Consortiums formed
• According to the OPRL, oil companies must form consortiums of at
least three companies to become Right Holder.The operator, should
have:
• assets of at least $10 billion.
• experience in drilling at more than 500 m below sea level.
• 35% stake in the consortium.
• So far three consortiums have been formed:
• TOTAL and Lukoil, the third company not disclosed yet.
• ExxonMobil and Rosneft, third not disclosed yet.
• Petrobras and Petroleb, looking for a third.
• Marathon, Cairn Energy and CCEnergy - not ofﬁcially announced.
Source Lebanese Oil & Gas HANDBOOK by LEBANON OPPORTUNITIES

Onshore Exploration
• Seven wells have been drilled onshore (1947-1967),
indicating prospects of onshore petroleum.
• The Lebanese MEW has contracted Spectrum to
acquire onshore oil data, scheduled for February
2013.
• Neos GeoSolutions with the support of its local
partner Petroserv,, announced on Wednesday June
10th, 2015 the completion of Lebanon’s geoscience
program and the data delivery to the Ministry of
Energy and Water
• This geoscience survey over an area of 6,000
square kilometers along the Transition Zone (TZ)
and the northern part of Lebanon’s Onshore,
conﬁrmed the potential of HC in Mount Lebanon
and the Bekaa valley. The US $7.8 Million project
named CedarsOil.
• “Results are promising and companies will come to
invest” according to Mr. Chbat Head of the
Geology and Geophysics department at LPA.
Actual acquisition aircraft used in Lebanon

Challenges
• The outlook for Lebanon, however, is highly uncertain. Delayed decision-making and inadequate
administrative capacity cast doubt on the goal of starting production by the end of this decade.
• Managing Hydrocarbon revenues (avoiding the paradox of plenty - Dutch disease).
• As of July 2015, the Lebanese government has failed to pass two decrees that are essential for
tendering Lebanon’s offshore acreage. The failure to pass these two decrees illustrates:
• Lebanon’s complex domestic political landscape, which affects the decision-making
process, the quality of institutions, the efficiency of public administration, and the
business environment, and
• 2) the difficulty of delimiting Lebanon’s EEZ, in light of the dispute with Israel, which
could escalate if either country decided to award blocks in the disputed area
• Another source of delay is the Lebanese “allotment state” (dawlat al-muhasasa)
• As a result, Lebanon suffers from a poor institutional framework, a weak business environment,
administrative inefficiencies, lack of accountability, and political deadlock, even where vital
interests, such as exploration for oil and gas resources, are at stake.
• This political structure also encourages corruption and rent-seeking behavior.

Reasons for Optimism
• Despite the internal and external challenges regarding Lebanon’s
offshore energy supplies, there are reasons to be optimistic that
these obstacles could one day be overcome:
• On January 27, 2015 ofﬁcials from Norway and Lebanon
signed a three-year agreement to cooperate in further
developing Lebanon’s oil and gas sector.
• The United States has also offered its assistance in helping
Israel and Lebanon solve their natural gas dispute. In
December 2014, US Ambassador to Lebanon David Hale said
“United States remains committed to supporting Lebanon’s
efforts to make the transformation to an oil and gas producing
country.”
• Amos J Hochstein, the Department of State Special Envoy and
Coordinator for International Energy Affairs, visited Lebanon
on July 2015. He reafﬁrmed American support to Lebanon in
its efforts to achieve economic growth and prosperity through
development of its offshore energy prospects.
• The Lebanese themselves are also raising greater awareness
towards advancing the nation’s energy sector.

Opportunities
• Conversion of Zouk power Plant and Jieh
Power plant from fuel oil to natural gas.This
will save 2 Billion USD per year.
• Re-commissioning of Tripoli and Bahraini
reﬁneries.
• LNG Export facilities (Cyprus is building one
for US $1.5 Billion)
• Coastal pipeline from Beddawi to Tyre.
• Export Pipeline and facilities to Turkey, Jordan,
Egypt, Syria and Iraq.
• In cities gas distribution network
• Developing petrochemical industries which
will create thousands of jobs (power plants,
fertilizers/Urea plants, Methanol/ethylene
plants, etc….)

Useful Links
• Petroleum Administration Lebanon (http://www.lpa.gov.lb)
• American University of Beirut, AUB (http://aub.edu.lb.libguides.com/content.php)
• Ministry of Energy and Water (http://www.energyandwater.gov.lb)
• Investment Development Authority of Lebanon, IDAL (http://investinlebanon.gov.lb)
• http://lebanon-oil-and-gas.blogspot.com
• Oil & Gas HANDBOOK by LEBANON OPPORTUNITIES, (www.infopro.com.lb)
• OIL AND GAS IN LEBANON 2014 by BANKMED
• OIL & GAS SECTOR: A NEW ECONOMIC PILLAR FOR LEBANON 2015 BY Credit Libanais SAL
Bank
• LEBANON:THE NEXT EASTERN MEDITERRANEAN GAS PRODUCER by The German Marshall
Fund of the United States 2015
• Energy Information Administration (EIA), www.eia.gov
• EIA, Eastern Mediterranean Region (http://www.eia.gov/beta/international/analysis_includes/
regions_of_interest/Eastern_Mediterranean/eastern-mediterranean.pdf)

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