Background Decrees Bidding process

In its first session on January 4 2017, the new government approved two draft application decrees after a three-year delay. The decrees are part of the final package of legislation necessary to resume the long-awaited tendering process for oil and gas exploration and production in Lebanon.

Background

The tendering process commenced in 2012 with a call for interested companies to pre-qualify. In April 2013 46 pre-qualified companies were confirmed, 12 of which – including Chevron, Eni, ExxonMobil, Petrobras, Petronas, Shell, Statoil and Total – qualified as operators. The remaining 34 – including Cairn Energy, Crescent Petroleum, GDF Suez E&P International, Marathon Oil and Lukoil – qualified as non-operators. Although the first tendering round was launched in April and May 2013, the process came to a halt pending the approval of the draft decrees.

Decrees

According to the Council of Ministers' press release, the decrees:

  • confirm the delineation of the offshore blocks (Decree 42 dated January 19 2017) ; and
  • approve the tender protocol, defining the terms and conditions of the bidding rounds and model exploration and production agreement (EPA) to be signed by the winning consortiums (Decree 43 dated January 19 2017).

The decrees were effectively published in Official Gazette 4 on January 21 2017.

Bidding process

Lebanese authorities have estimated that the country's waters could hold 96 trillion cubic feet of natural gas and 865 million barrels of oil.(1) The government hopes that the 46 qualified companies will still be interested in participating in the tendering process. This is expected to be the case following the minister of energy's announcement that five blocks will be offered for exploration in the first bidding round. Eventually, a total of 10 blocks will be offered, as detailed on the map below.(2)

As regards the blocks to be offered in the first bidding round, the minister referred to:

  • Block 1 in north Lebanon (near the Syrian and Cypriot borders);
  • Block 4; and
  • Blocks 8, 9 and 10 in south Lebanon.

EPA signatories must be consortiums comprising at least three qualified companies (the so-called 'rights holders'), which will be jointly and severally liable to the state. After conducting the exploration, if any oil or gas is discovered, the rights holders must assess whether this can be used commercially. If so, the rights holders must propose a plan for the development and production phases and submit it to the Lebanese Petroleum Administration. The administration will then forward it to the minister, who will subsequently forward it to the Council of Ministers to decide accordingly.

For further information on this topic please contact Mohamed Y Alem or Jana Tebbo at Alem & Associates by telephone (+961 1 999 717) or email (mohamed.alem@alemlaw.com or jana.tebbo@alemlaw.com). The Alem & Associates website can be accessed at www.alemlaw.com.

Endnotes

(1) Further information is available here.

(2) Decree 42, January 19 2017.

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