- 27
- May
- 2024
Lebanon: Promising Blocks Attract Investments
modified on 09 June 2024 à 07:05 Read : 6 minute(s) A A A
So far, TotalEnergies Group's report on drilling and exploration results in Block 9, southern Lebanon, remains unpublished, albeit the legal deadline passing for TotalEnergies to submit it to the Lebanese State represented by the Ministry of Energy. Drilling operations in the mentioned block ceased in mid-October 2023, and despite Minister Walid Fayad's repeated letters emphasizing the urgent need to deliver the report to the Ministry of Energy and Water, the French company has yet to comply.
As we await the decision from the consortium of TotalEnergies, Eni and Qatar Energy regarding the continuation of their activities in Block 9 following the completion of the first phase of this process, or potential relinquishment as seen in Block 4, within a deadline ending at the close of 2025 to decide accordingly, the paramount question remains: What does the future hold for the development of Lebanon's oil and gas sector amidst ongoing regional conflicts and geopolitical shifts?
We presented this file to the international energy expert, Rudy Baroudi, who once again outlined the recent developments in the sector. It traces back to early October 2023 when the drilling ship, operated by the consortium “Transocean Partners,” began drilling the first exploratory well in Block 9, reaching a depth of around 3,900 meters below the seabed.
The contract between the consortium and the Lebanese State, outlined in paragraph C, stipulates “That the exploratory well must be drilled to a depth of at least 4400 meters (Four thousand four hundred), as determined in the agreement. Consequently, the rights holders in Block 9, which include TotalEnergies, Eni, and Qatar Energy, covering an area of 1,742 square kilometers, are deemed guarantors of contract fulfillment.”
From the first week of October 2023, the consortium reached a depth of 3900 meters, falling short of the contracted 4400 meters. Baroudi adds, “Regrettably, the outbreak of the Gaza war on October 7 resulted in the suspension of exploration activities off the Lebanese coast on October 13. Microwave devices, surveillance towers, land transportation, telecommunication stations, and satellite communications were disrupted across the whole southern region, which obstructed both communication and exploration works.”
During the early weeks of the war, TotalEnergies decided to relocate the exploratory drilling platform to Cyprus, specifically targeting Block 6, to avoid the nearby tensions associated with Block 9. Under the contract with the Lebanese State, it was expected that the operator or TotalEnergies’ consortium leader would inform the Lebanese authorities within six months of reaching a depth of 3900 meters, providing technical and seismic data. However, as of today, this information has not yet been submitted to the relevant authorities.
In this context, Baroudi adds, “In the neighboring Karish field, spanning 400 square kilometers and located just a few miles south of the maritime border between Lebanon and Israel (Master Bill of Lading MBL), operators (Energean Oil and Gas & Kerogen Capital) discovered gas at a depth of 4,880 meters.”
In further developments, as part of Lebanon's second licensing round concluded on October 2, 2023, the consortium comprising TotalEnergies, Eni and Qatar Energy applied for additional exploration in Blocks 8 and 10, both adjacent to Block 9. This is what underscores, according to Baroudi, the consortium's keen interest in this area. However, the detailed offers failed to meet the Lebanese government's expectations. Despite the government's preliminary approval of the two bids in January 2024, it requested the Ministry of Energy and Water to negotiate with consortium members, particularly concerning the proposed exploration timeline. In other terms, the Lebanese government conditionally approved the consortium's proposed offers. After declining to sign the amended contracts, it seemed that the companies rejected two of the conditions that the Lebanese State sought to impose:
- The first condition relates to the period within which the consortium, upon contract signing, can decide to conduct three-dimensional seismic studies for Block 8. The consortium had requested a one-year timeframe to implement this process, awaiting the comprehensive results of Block 9 drilling activities. However, Lebanon considered the three months as enough to initiate the study operations, as these results were expected by March 2024.
- The second condition, negotiated but ultimately rejected by the consortium, concerns the timeframe within which a decision on drilling in Blocks 8 and 10 is made. While Lebanon initially set a one-year deadline, the consortium requested a two-year extension.
Consequently, Blocks 8 and 10 will be introduced as part of the expected closure of the third licensing round by July 2024. Even before the separate offerings of Blocks 8 and 10 in October 2023, Lebanon aimed to boost the value of Block 8 by August 2023 through the launch of a three-dimensional seismic survey in the designated area assigned to Geoex MCG and Brightskies.
Baroudi notes that this survey aimed to gain a better understanding of the geological characteristics of the area adjacent to Israel's production fields. This area had not been previously covered by both two-dimensional and three-dimensional seismic surveys due to border disputes. Additionally, the objective was to enhance the block’s value and foster competitive participation.
Baroudi's insight raises the possibility that the Ministry of Energy and Water may not be fully aware of the persistent instability in the Eastern Mediterranean, particularly how difficult it is to attract new private sector companies to the region, given the ongoing war in close proximity.
For instance, Energean also requested a 4D seismic survey for the Karish field in 2019. The seismic surveys in Blocks 8, 9 and 10 will offer invaluable insights into the subsurface geology of these areas, which were contested before October 2022. Therefore, the areas in question remained inaccessible to survey operations for many years until the maritime border demarcation agreement was signed between Lebanon and Israel in 2022. Consequently, the data obtained from these studies will enable any company to make better-informed decisions regarding the location of their next round of exploratory drilling, once it is deemed safe to resume operations.
Based on geological analyses of leading oil companies, conducted on the opposite side of the border demarcation agreement between Lebanon and Israel, Blocks 8, 9 and 10 stand out as the most promising according to Baroudi. These blocks offer Lebanon the greatest potential to launch energy production operations and reignite the needed sustainable positive economic growth. “Ultimately, once the bloodshed in Gaza ceases, maritime exploration operations can resume. However, another essential condition for exploration and the revival of this sector, with Lebanon capitalizing on its resources, hinges on the election of a president and the formation of a new government. This is particularly crucial given the current caretaker government’s inability to appoint new members to the Petroleum Administration Authority and to launch necessary reforms to protect and exploit any resulting revenues,” he adds.
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