The Lebanese became optimistic when they heard about the possibility of discovering natural gas reserves in their territorial waters. But the optimism was soon followed by a question that nearly all Lebanese asked: who would benefit from the revenues? Will the politicians put their hands on them? Interestingly, most citizens, regardless of their religious and sectarian affiliations, asked this question. Meanwhile, achieving petroleum discoveries in Lebanon would be a golden opportunity that will open the doors to a new economic sector that eases the pessimism prevailing in the country. Lebanon has been suffering for months from a crisis relating to the formation of a new government. There is a resigned government (caretaker government) and another in the process of being formed. The petroleum issue has overlapped with the complexities of forming the government. For one thing, Lebanese laws require the cabinet to approve offshore blocks where concessions would be given to international companies, the terms and conditions, and the details of production sharing agreements. But the same laws limit the powers of caretaker governments. The request by the caretaker Energy Minister Gebran Bassil to hold an extraordinary cabinet session to discuss and vote on pending petroleum issues has therefore been constitutionally problematic, causing a lot of political controversy. The opposition Future Movement has objected to holding an extraordinary session because signing contracts with oil companies now would mean committing the government to 25-year agreements. This, the Future Movement believes, is not urgent, and requires being discussed and voted upon by a government with full powers, to avoid starting a precedent that might impact on the powers of resigned governments in the future. Of course, in the absence of an emergency session, the matter will have to wait until the next government is formed. However, the formation of this government remains difficult because of the sharp polarization in Lebanon among its political forces. The energy minister had called for an extraordinary session of the caretaker government to fulfill the ministry's commitments to international companies, to press ahead with the first tendering round on schedule, without further delays. At the same time, other differences have emerged, including: why should there be only 10 offshore blocks? Should they all be licensed out during the first tendering round, or should specific blocks (2-3) be first licensed out, and then the rest gradually? This issue was at the heart of a broad dispute between the energy minister, who supports the second option, and the parliament speaker, who supports the first. Of course, these questions should have been directed at the Petroleum Administration, the party responsible for managing the petroleum sector and for drawing up the blocks in question, and therefore, the party that has the information and the rationale needed to provide the answers. The Administration is supposed to have drawn up the blocks on the basis of the results of 3D seismic surveys. It is also expected that the Parliamentary Committee on Energy would discuss this matter later, following discussion and approval in the cabinet. Meanwhile, one of the major hurdles facing oil and gas exploration in the eastern Mediterranean lies in the absence of agreements over demarcating maritime borders among the countries there, a step required before signing agreements with companies and beginning exploration and drilling (Palestine, Israel, Lebanon, Syria, Cyprus, and Turkey). Further adding to the problem is the fact that some of these countries occupy territory belonging to neighboring countries or have engaged in hostilities against the latter, the fact that there are conflicts raging in some of these countries, and the fact that there are historical disputes and/or cross-border ambitions by certain countries regarding the territories of other countries. For example, there is the issue involving the Gaza Marine Gas Field, which was discovered in Palestinian territorial waters in 2000. The field has yet to be developed because of Israeli pressures. Israel began exploration for oil and gas back in the beginning of the last decade in its southern waters. However, most of the fields were very small and in close proximity to Palestinian waters. But beginning with 2009, important fields were discovered in the northern waters, close to Lebanon and Cyprus. These discoveries unleashed mutual accusations and threats between Israel and Lebanon, with maritime border disputes already existing between them. Israel announced it would be forming special marine units to protect its rigs, while Hezbollah threatened to strike at the latter should Israel begin drilling for oil in Lebanese waters. Israel threatened to resort to force or courts if Lebanon drills in its waters as well. There was also a lot of unofficial talk in Lebanese circles that Israel might be syphoning gas from Lebanese fields through horizontal drilling. There was no official statement about this matter however, only warnings that this could be possible in the future. So should all areas available to Lebanon be included in the first tendering round? And, what is the goal behind drawing up only 10 blocs? Lastly, should international companies receive licenses in one go, or should they receive them gradually? The reason for trying to license all offshore areas at once has to do with the desire to obtain accurate information about the area's geology early on. The reason behind drawing up 10 wide blocks has to do with the technical data available to the Petroleum Administration, which is supposed to have relied on 3D seismic surveys in drawing the blocks. Granting licenses in one go means signing contracts on all of the blocks. Granting licenses gradually, however, has sparked fears, which I believe are misplaced, except when it comes to blocks 8,9, and 10 in the south. It was clear from the beginning that the blocks were drawn up to cover all Lebanese territorial waters. Some wonder why there should be a rush in licensing out the blocks. In truth, what is at stake here is Lebanon's professional reputation in the oil industry, especially since Lebanon is a newcomer to this field. With each delay in the first tendering round that Lebanon announced recently, its professional credibility is further shaken. In addition, neighboring countries like Israel and Cyprus are years ahead of Lebanon in this field. But those calling for delaying [the licensing] fear that the Lebanese oil industry could start on the wrong foot, while being marred by rumors and controversy, especially if current practices continue. At the same time, officials are calling for taking necessary measures to start the first tendering and licensing round, to save Lebanon's reputation. It is worth mentioning that specialized companies that can conduct drilling and production at a depth of around 20,000 feet under the surface of the sea are only a handful, and competition is strong to attract them. Indeed, they have the opportunity to operate in other countries in East Africa, Brazil, Angola, and the North Sea. * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
