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Lebanon's muted celebrations

IOCs' wariness takes the shine off Lebanon's first licensing round

This should be the year when Lebanon celebrates the coming of age of its long-nascent energy sector, with an eye on the estimated 95 trillion cubic feet of natural gas and 0.75bn barrels of oil in its offshore. At the start of 2017 the political blocks were mostly in place and signs looked promising. After 30 months without a president, Michel Aoun had been elected head of state and Saad al-Hariri had formed a government.

The new administration then passed laws governing bidding and contracts, allowing the country's energy minister Cesar Abi Khalil on 26 January to announce a timetable for the first offshore licensing round. On offer are blocks 1, 4, 8, 9 and 10.

The minister said that the 46 firms that had prequalified way back in 2013 would still be able to bid, and others could join the list—with the final version to be published in mid-April. The bids deadline is 15 September, for evaluation by the Lebanese Petroleum Administration on 16 October. Exploration and production agreements will be signed on 15 November.

But the mood of celebration was dampened somewhat in February when the government held a workshop for prequalified companies. According to those present, only about a quarter of the original 46 firms showed up, including just two major operators, Eni and Total.

It seems that Lebanon still can't isolate its energy sector from regional geopolitical disputes, internal political wrangling, bureaucratic delays and allegations of corruption—issues that contributed to the three-year delay to the licensing round.

For a start, three of the blocks on offer (8, 9 and 10) are situated next to Israeli waters. The delineation of the common boundary is disputed by both Lebanon and Israel, which are technically still at war. Block 1 abuts Syrian waters, where again boundaries have not been settled. These are hardly reassuring circumstances for would-be investors.

As for internal issues, the Lebanese authorities insist that the integrity and independence of the energy sector are guaranteed. "Transparency is our main focus," Abi Khalil told reporters in January.

But some companies are yet to be convinced. "Everyone's in favour of what's happening," a Lebanese executive said, "but the problem is in the details, like what will happen to the revenue. Nobody knows."

There are suggestions, for example, that the Iranian-supported Shia group, Hizbollah, would insist on at least a substantial share of revenue from blocks in the south, close to territory it controls.

So uncertainties remain: Lebanon's first licensing round is happening, but it might not be the party that the authorities were hoping for.

Offers, please: Lebanon's first licensing round
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