lebanon oil & gas 2015

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






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

Lebanon has a lot to offer

Content






6. Challenges

7. Conclusion

8. References

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.

Content






6. Challenges

7. Conclusion

8. References

• 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 BasinSource: 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.

بحسب الخبير النفطي ربيع ياغي نحو 25 تريليون قدم مكعب من الغاز على األقل, و80 تريليوناً على األكثر, و1.5 مليار برميل من النفط الخام اذا تأكد وجوده. بحساب بسيط فان كل تريليون قدم مكعب من الغاز تقدر قيمته بنحو 12 مليار دوالر, واذا كان نصيب لبنان من الغاز 25 تريليونا, فان

ثروته تقدر بنحو 300 مليار دوالر, أما اذا كانت 80 تريليوناً فالتقديرات تتجاوز 960 مليار دوالر.

Our Country Has Oil

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

Content






6. Challenges

7. Conclusion

8. References

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 AdministrationMarfaa, 200 Building – Third FloorGeorges Akouri StreetDowntownBeirut, LebanonTel/Fax: +961 1 998 780

[email protected]

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.

Content






6. Challenges

7. Conclusion

8. References

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 monthsBid Evaluation: Up to 2 monthsAward: 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

Content






6. Challenges and Opportunities

7. Conclusion

8. References

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….)

Conclusion

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)

Example of the Fiscal System

lebanon oil & gas 2015

Economy & Finance

world bank lebanon

executive summary

hydrocarbon prospects

oil gas prospects

major mile stones

levantine basin

lebanese offshore area

offshore seismic surveys