Pursuant to the Offshore Oil and Gas potential suggested by the two-dimensional and three-dimensional seismic surveys conducted since 2000 and in order to encourage the exploitation of such potential, Lebanon enacted the Offshore Petroleum Resources Law No. 132 of 24 August 2010 (the “Petroleum Law”) which constitutes the milestone in the industry’s development and aims to regulate the offshore petroleum sector.
The latest hydrocarbons developments indicate that Lebanon is on its way to become a key player in the Middle Eastern Oil and Gas industry. Indeed, year 2012 ended with the nomination of the board of Directors of the Petroleum Administration Authority (the “PAA”) entrusted with the administration of the petroleum sector. Year 2013 started with the Pre – Qualification Round (the “Pre – Qualification Round”) conditioning the eligibility of all joint stock petroleum companies (the “Petroleum Companies”) wishing to participate in the highly anticipated First Offshore Licensing Round (the “Licensing Round”), where such pre-qualified companies will bid for an Exploration and Production Agreement (the “EPA”) by the Lebanese Government.
The Pre – Qualification Round initially had fifty two (52) Petroleum Companies applying as operators and non-operators round. In this respect, on April 18, 2013, twelve (12) Petroleum Companies have prequalified as operators and thirty four (34) have prequalified as non-operators all on the basis of their legal, financial, technical and QHSE criteria. The List of pre qualified companies can be found on the following link ( LEB-Prequal-Results-18Apr2013).
On April 30, 2013, the Minister of Energy and Water (the “Minister”) officially announced the launch of the long awaited Licensing Round, which will be opened starting May 2, 2013 until November 4, 2013, being the scheduled deadline to submit the applications.
According to the Minister, the smooth running of the Licensing Round has as a prerequisite the adoption of two (2) decrees by the Council of Ministers, namely:
- A decree setting the standard provisions for the EPA (Article 8.2 of the Petroleum Law).
- A decree setting the progressive fees (calculated per square kilometer) payable by the Right Holders for using the block, starting from the first year following the expiration of the exploration phase provided for under the EPA (Article 41.2 of the Petroleum Law).
However, due to the actual caretaker government, the Minister specified that if these decrees are not approved by a new Council of Ministers before September 2, 2013, the Ministry of Energy and Water (the “Ministry”) reserves the right to delay, postpone or cancel the tendering process.
Additionally, the PAA announced that in the first phase, ten (10) blocks will be proposed and the pre-qualified companies shall have until June 15, 2013 to nominate the blocks they wish to bid for while noting that such nomination could be made individually by each pre-qualified company. Afterwards, and on June 30, 2013, the PAA shall announce the final blocks to be opened for bidding in the Licensing Round.
It is worth mentioning that the Ministry announced that only four (4) blocks will be awarded per licensing round. Furthermore, a minimum of three (3) bids per block shall be required in order to allow the negotiation process for each block in view of its awarding. Finally, each consortium cannot be awarded more than one (1) block.
The Application Fee per Consortium and per block is set at Fifty Thousands US Dollars (US$ 50,000), which shall be paid no later than July 31, 2013. Purchase of three-dimensional seismic data will also be necessary for the companies wishing to participate in the Licensing Round. Moreover, the bid bond has been set at Five Million US Dollars (US$ 5,000,000) per consortium and per block.
Regarding the EPA, the PAA announced that it shall proceed with a public consultation process where the pre-qualified companies will have until June 1, 2013 to submit their questions and comments to the draft EPA as shall be published on its new website (http://www.lpa.gov.lb/). Following that, a conference between the PAA and the pre-qualified companies is expected to take place during the week of June 17, 2013 to discuss the comments and notes on the draft EPA before its submission to the Council of Ministers for approval followed by its publication in the Official Gazette.