Questions linger following ratification of oil and gas decrees

On Thursday January 5, 2017 the Ministry of Energy and Water hosted a press conference announcing the ratification of two oil and gas decrees, one pertaining to block delineation and the other to the Tender Protocol and Exploration and Production Agreement (EPA), moving Lebanon closer to exploring for oil and gas in its offshore waters.

The two decrees have long been delayed. In April 2014 an inter-ministerial committee was formed by then-Prime Minister Tamam Salam to study the decrees and build political consensus. Looking back, however, it appears that the committee’s role was to stall rather than develop an oil and gas sector, according to a recent op-ed that pointed out that the committee failed to inform the public about what was achieved, why the two decrees did not pass sooner, and what the plan was for the sector.

In announcing the decrees newly appointed Minister of Energy and Water Cesar Abi Khalil did not address those concerns, and details of the decrees and the coming bidding process for exploration licenses are yet unclear. The decrees, following official protocol, will be published in the National Gazette later this week.

That, after nearly three years of political stalling, there is still no clear strategy for developing a local oil and gas sector and that disclosure of the EPA might not be forthcoming is of concern to industry and civil society stakeholders.

During the press conference the minister promised a roadmap but gave no timetable for announcing such a strategy. Civil society has presented research, offering consultation essentially for free, to the government on international best practices for developing an oil and gas industry. But that no plan yet exists strengthens the credibility of calls by civil society to be an active partner in the decision-making process. And the lengthy delay has surely aggravated the uncertainty over having no plan that industry executives were already lamenting back in 2014.

The minister referenced transparency standards for the sector saying that the Extractive Industry Transparency Initiative (EITI) – a global transparency initiative led by governments, companies and civil society – and other organizations had seen the Tender Protocol and did not express any reservation. But he did not say whether those organizations had seen a model of the EPA, a contract that would include biddable components or clauses affecting competitiveness, and he did not heed calls by civil society to join the EITI, a recommendation that the parliament’s energy committee made in 2016.

There is still no resolution to Lebanon’s maritime border dispute with Israel. American-led efforts to mediate a solution have not been fruitful and it is not yet clear who US President-elect Donald Trump might appoint to replace outgoing lead negotiator, Amos Hochstein, or whether mediation will be a priority of the Trump Administration.

Will the Lebanese government allow additional companies to bid for exploration licenses? Abi Khalil suggested that the government needed to gauge the interest of the 46 companies that had prequalified to bid for exploration licenses back in 2013. 

Lebanon might sign exploration licenses before the end of 2017, the minister said, adding that extensive seismic surveying and data interpretations could help exploration companies quickly pinpoint where to drill wells. Abi Khalil promised legislation for a sovereign wealth fund to pool any revenue generated from oil and gas production. The drafting of such a law should face public dabate in how much revenue should be saved in and invested through the fund and how much to channel directly to the national budget. But first the government must ratify a petroleum tax law and a budget before thinking about saving or spending money that is not yet sure to come.

Now that the decrees have been passed, Lebanon has moved one step closer to becoming an oil and gas producer. But big questions remain on how development of an oil and gas sector will be managed and whether the government would meet the transparency standards it has promised.

Leave a Comment