(Adds analyst comment, background)
BEIRUT Jan 5 Lebanon intends to restart its
first oil and gas licensing round after a three-year delay, the
energy minister said on Thursday, hoping to kick-start the
development of a hydrocarbon industry stalled by national
In its first sitting since being formed in December,
Lebanon's new cabinet passed two decrees on Wednesday defining
the blocks and specifying conditions for production and
exploration tenders and contracts.
The country's offshore resources could bring a major
economic boost to a country whose financial mainstays including
tourism have been hit by conflict in the region and Beirut's own
political turmoil. But analysts warn of challenges ahead and
that investor confidence has been shaken by the setbacks.
Lebanon will offer five offshore blocks for exploration and
production and is to hold another pre-qualification round for
companies interested in bidding, Minister of Energy and Water
Cesar Abou Khalil told a news conference.
Lebanon, along with Cyprus, Israel and Egypt, sits on the
eastern Mediterranean gas field discovered in 2009.
The Lebanese government has estimated with a probability of
50 percent it has 96 trillion cubic feet of natural gas reserves
and 865 million barrels of oil offshore, but squabbling between
parties has prevented the passage of vital laws needed to
develop the sector.
Abou Khalil said if all goes to plan exploration contracts
could be signed in nine months and drilling could take place in
as little as a year and a half after that because a lot of the
necessary mapping and analysis has already been done.
With large debt, stagnant growth and bearing the costs of
more than 1 million refugees from neighbouring Syria's conflict,
Lebanon would benefit from the revenues, job creation and
increased economic activity that might accompany a hydrocarbon
But analysts urge caution, saying until drills actually
break ground, there is no way of telling how much gas or oil
there really is and potential economic impact is a complete
Sami Atallah, executive director of the Lebanese Center for
Policy Studies, said it could take around seven years before
revenues start to flow.
"Oil and gas are not the answer," he said. "You don't want
it to stall reforms ... to be a disincentive for making changes
to the economy."
Industry watchers say Lebanon needs to now produce
transparent road maps and regulatory framework for the energy
industry. This will boost investor confidence and avoid the
accusations of corruption which surround many of Lebanon's
public services and industries such as refuse disposal,
telecommunications and electricity.
"The oil and gas industry can be a curse or a blessing,"
said Diana Kaissy, of the Lebanon Oil and Gas Initiative, a
non-governmental organisation promoting transparency and policy
development in the hydrocarbon sector.
"Lebanon is blessed with the chance of starting straight
from the beginning with its oil and gas industry. It can learn
from others' mistakes and best practices," said Kaissy, who is
also part of international transparency campaign group Publish
What You Pay.
In 2013, 46 companies qualified to take part in bidding for
oil and gas tenders, 12 of them as operators, including Chevron
, Total and Exxon Mobil.
Abou Khalil said he expects these 46 companies to be
interested still and that Lebanon will hold another
pre-qualification process to increase competition and secure the
Political risk consultant Mona Sukkarieh said investor
enthusiasm for the 2013 tender was high, but the delays have
"It is essential now to do things right, even if not swiftly
... A competitive fiscal regime, in addition to regulatory and
fiscal stability are key to gain back investors' confidence,"
said Sukkarieh, co-founder of Beirut-based Middle East Strategic
Political paralysis left Lebanon without a president for
more than two years. The government was unable to tackle
long-pending economic and development issues such as garbage
disposal, electricity, water and stock market privatisations.
The deadlock finally came to an end late last year with the
election of Michel Aoun as president and the formation of a new
government under Prime Minister Saad Hariri.
"At times, country risk might be high, but that does not
entirely conceal Lebanon's energy potential. Oil and gas
companies are used to operating in areas where political and
country risks are high," Sukkarieh said.
The government's next task is to agree a tax regime for the
nascent hydrocarbon industry.
On Wednesday, the cabinet also agreed to form a ministerial
committee to discuss the draft tax law. Abou Khalil said the
committee would meet on Thursday.
"The committee is committed to finalise comments on the tax
law (with) the shortest delay," he said.
"It might take a couple of weeks, and then we will go back
to the council of ministers and we will transfer the (draft) law
to the parliament, where it is expected to be passed in the
first legislative session."
(Reporting by Lisa Barrington and Laila Bassam; Editing by Dale
Hudson and Susan Fenton)