The oil exploration vessel Tungsten Explorer off the Lebanese coast, February 25, 2020. (AFP file photo)
BEIRUT — The future of a multi-company offshore gas exploration consortium remains unclear after Energy Minister Walid Fayad announced Wednesday that Russian gas company Novatek would be backing out of the group, citing “economic and financial” reasons as well as “political risks.”
The consortium, which includes the French giant Total and the Italian ENI, had won the first round of offshore hydrocarbon exploration and exploitation licenses ever launched by Lebanon and covering blocks four and nine of the offshore Lebanese exclusive economic zone (EEZ).
Though the exploration deal still stands, Novatek’s departure raises legal questions. Laury Haytayan, a Lebanese oil and gas expert, told L’Orient Today that “all provisions, whether the law, the signed decrees, or the signed exploration deal, say that there have to be at least three companies in the consortium,” adding that authorities would have to replace Novatek with another company if they are not planning on devising a new legal opinion on the matter.
The Energy Minister did not respond to requests for comment by the time of publication.
Haytayan added that authorities have not been clear on what procedures they will take concerning replacing Novatek: “Would Total and ENI decide on a third company which the government would then approve, or are they going to repeat the bidding process to find a third company?”
After years of delaying the matter, the companies’ contracts were signed with great fanfare in early 2018, but only one exploration well has been drilled to date — block four — with no significant hydrocarbon reserves found. The other well — block nine — has meanwhile been at the center of a maritime border dispute between Lebanon and Israel.
The dispute has obstructed energy exploration in the eastern Mediterranean and risks exacerbating tensions between two foes.
The Energy Ministry stated on Wednesday that Total and ENI have reassured their commitment to their gas exploration contract while Novatek's withdrawal will be effective starting Oct. 22.
The Energy Ministry had announced on June 15 that it would extend the deadline by which energy companies can apply for pre-licenses to explore Lebanon’s offshore territory in search of potential hydrocarbon deposits until Dec. 15, 2022. The ministry’s previous deadline for applying for pre-licenses had expired in June.
The June statement, the Energy Ministry said that the decision came in response to a recommendation made by the government’s Lebanese Petroleum Administration, “to allow additional companies which do not already work on Lebanese offshore [areas] to prepare their files and participate in the coming [pre-licensing] round which opens space for an acceptable level of competition between international oil and gas companies.”
