Although Lebanon holds significant oil and gas potential, it remains little explored and plans for exploration are likely to see significant delays due to continuing political disputes, both at home and abroad.

According to Lebanon’s Energy Ministry, the country’s Mediterranean waters hold 96 trillion cubic feet of natural gas and 850 million barrels of oil, but this speculative figure is likely to remain unconfirmed for some time to come.

War overspill

Lebanon’s domestic politics are becoming increasingly fraught as the war in Syria continues to flood the country with refugees, putting a strain on the economy and ramping up tensions between Sunni, Shia and Christian groups.

Lebanon has been without a president since May and is not expected to see a new one voted in for some time due to a continuing disagreement over candidates between the two main political blocks – the Sunni-led March 14 alliance and the Shiite-dominated March 8 alliance.

The political impasse has proved to be highly disruptive to government projects, and the country’s nascent oil and gas sector has been hit with delays.

Lebanon has repeatedly postponed the licensing round for 10 offshore blocks and more delays are expected as officials continue to wrangle with opponents to the scheme, who are concerned about royalties and taxes outlined in draft decrees.

The setbacks have made Lebanon a regional laggard, falling behind even Syria in its efforts to develop offshore Mediterranean resources. Since 2010, when Israel first sparked excitement about the Mediterranean with the discovery of the Leviathan gas field, which holds an estimated 21.93 trillion cubic feet of natural gas, Cyprus has found an estimated 4.1 trillion cubic feet of gas in its offshore Aphrodite field, and Russia’s Soyuzneftegaz has signed a $90m deal with Syria to develop its offshore oil and gas potential.

As Lebanon struggles to catch up with its neighbours, matters are further complicated by an ongoing dispute with Israel over where exactly the maritime border between the two countries lies.

In October last year, Israeli officials made statements claiming that some of the waters included in the offshore blocks outlined by Lebanon lie within Israel’s exclusive economic zone. The disputed area covers about 850 square kilometres and lies within Block 9, which is located to the north of the Israeli gas field Tanin.

Further delays to the planned licensing round are likely to be costly. As time passes, Lebanon is becoming increasingly unstable due to the spillover from the Syrian civil war. The country is suffering a rising number of rocket and bomb attacks, while the fighting next door and influx of refugees is further polarising Lebanese society. In August, militants overran the northeastern town of Arsal, marking the first large-scale incursion into Lebanese territory.

Losing interest

The tension and social fragmentation is likely to reduce the appeal of Lebanon as a place for international oil companies to do business, and could force it to have to make its contract terms more generous. Some companies have already signalled that they are becoming less enthusiastic about the increasingly chaotic nation’s gas potential.

In July, Lebanese officials told the media that Norway’s Statoil and Italian oil company Eni had already informed the government that they were losing interest in the upcoming auctions.

Worsening sectarian hostilities and the continuing dispute over the border with Israel mean that progress on the licensing round is unlikely to come easily, and more foreign oil companies could soon run out of patience with Lebanon’s bickering politicians.

Minister of energy and water: Arthur Nazarian

Key contact: Petroleum Administration

Tel: (+961) 1 998 780

Web: www.lpa.gov.lb