Alem & Associates
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Energy & Natural Resources
The Council of Ministers recently launched the second offshore licensing round for oil and gas exploration in numerous blocks. It also approved the updated tender protocol and approved updates to some articles of the model exploration and production agreement. The Lebanese Petroleum Administration has invited interested companies to combine their bidding efforts by forming consortiums. This article examines the pre-qualification process and reviews how bids will be assessed up until the award stage.
Preventing corruption is a key challenge faced by the oil and gas sector worldwide. This is particularly true in developing countries, as the high level of financial resources generated by recent discoveries can create a breeding ground for corruption and abuse. Lebanon recently took a major step towards achieving transparency and accountability in this regard when it adopted Law 84 on Transparency in the Oil and Gas Sector.
Disputes are a significant risk in any energy project. As such, the Cabinet recently issued a model exploration and production agreement for petroleum activities. However, production-sharing contracts such as the agreement have frequently been the subject of international commercial and state investment disputes. It is therefore questionable whether the dispute resolution mechanism provided in the agreement allows for the efficient management of any potential disputes that may arise.
The new government recently approved two draft application decrees which are part of the final package of legislation necessary to resume the long-awaited tendering process for oil and gas exploration and production in Lebanon. The tendering process commenced in 2012 with a call for interested companies to pre-qualify. Although the first tendering round was launched in April and May 2013, the process came to a halt pending the approval of the draft decrees.
There has been an ongoing debate in Lebanon recently over whether it should establish a national oil company (NOC). While some emerging countries have benefited from NOCs, in other countries they have been the victims of corruption. As such, before establishing an NOC, Lebanon should thoroughly study the benefits of its establishment, as well as its role and allocated budget.
Recent discoveries in the eastern Mediterranean Sea may constitute the world's largest natural gas find. The Lebanese government has accordingly committed to resuming oil and gas exploration as soon as possible, by ratifying two decrees concerning the delineation of blocks to be opened for bidding and the model exploration and production agreement.
The latest hydrocarbon developments indicate that Lebanon is on its way to becoming a key player in the Middle Eastern oil and gas industry. The nomination of the board of directors of the Petroleum Administration Authority has led to major progress ahead of the launch of the first offshore oil and gas licensing round, while a recently discovered oil reservoir has stirred the optimism of investors.
A number of two-dimensional and three-dimensional seismic surveys suggest that the Lebanon basin has favourable geological prospects and significant potential for hydrocarbon production. The Offshore Petroleum Resources Law seeks to encourage the exploitation of the country's potential offshore resources by providing a regulatory basis for the petroleum sector.
The growing interest in exploring the Lebanese Basin has been stimulated by recent discoveries of massive gas reserves in neighbouring Mediterranean states. Significant deepwater discoveries have encouraged Lebanon to act quickly, passing legislation and commissioning a number of two-dimensional and three-dimensional surveys to determine the potential of the geological prospects.