Beirut set to move on gas contracts

The Financial Times

Lebanon is due to take a long-awaited step towards awarding contracts for exploration of its offshore gas reserves this month, but questions are being raised about readiness of the turbulent country for the process.

The reserves, which have been estimated at perhaps 25tn cubic feet according to Lebanon’s Daily Star, could have a transformative effect on the country’s debt-ridden public finances.

After months of delays, the pre-qualification process for interested companies is expected to start as early as this week.

When it eventually does, it will in theory initiate a bidding timetable insulated from the bickering and volatility of Lebanese politics and should see contracts being awarded in March next year. But analysts warn many complex, politically sensitive decisions still lie ahead.

“The legislation that has been passed is pretty user-friendly,” says George Booth of Clyde & Co, a law firm specialising in the energy sector. “But the devil is often in the detail.”

There has been pressure to take action on offshore exploration since neighbouring Israel discovered the Tamar gasfield off its coast in 2009. Subsequent steps by Turkey and Cyprus to explore their stake in the Levant basin put Lebanon at risk of being left behind.

Disputes with Israel, with which Lebanon is technically at war, and to a lesser degree Cyprus over maritime boundaries have added to the pressure to move forward.

Increasing political and sectarian polarisation in Lebanon has made taking any kind of action something of a challenge for successive governments – no budget has been passed since 2005.

Nonetheless, with a clear consensus on the importance of making progress on gas exploration (if not on how future revenues should be distributed), the government passed a petroleum law in 2010 and after month FULL STORY