Lebanon could meet its energy needs and generate $ 3 bn yearly

Oct 03, 2005 02:00 AM

Lebanon could meet all of its energy needs and generate revenue of about $ 3 bn a year if the government proceeds with the appropriate legislation to set the ground for oil and gas companies to come and drill for its hydrocarbon offshore reserves.
"Lebanon could have estimated oil or gas reserves of 70,000 and 90,000 bpd with indirect foreign direct investment revenues estimated at current oil prices of $ 60 bpd to reach $ 60 bn in 20 years," said energy and privatisation expert Roudi Baroudi, adding that "it won't take more than 10 to 18 months before we start cashing in."

As the world price of crude oil is skyrocketing, companies have excess liquidity and are looking for new ventures to invest in. This makes it imperative for the government to approach international corporations and start the bidding for offshore drilling, said Baroudi, adding that with newly available technology these initiatives are even more likely.
"In the 90s I would have been sceptical about the whole thing in terms of the cost incurred. But today, it takes nothing for a company to come and invest," said Baroudi.

Several studies done by at least three different seismic firms (Geopracla, Spectrum and TGS) covering 11,000 km cut along 120 2D seismic lines, collected useful data showing that Lebanon's shore is petroliferous.
"Shell, Occidental, TotalFinaElf, PetroCanada, Amerada Hess, and Reading and Bates are some of the companies that have bought these offshore seismic studies and showed interest in drilling for oil and gas" said Baroudi. He added that there is no way to find out the actual capacity if companies do not start drilling.

According to the energy expert, Lebanon has a few things to do in order to start seeing investment flowing in: first, it needs to prepare the necessary legislative framework, including creating an appropriate public sharing agreement (PSA) system which enables a company to invest in the operation and get an estimated 20 to 25 % of revenues, while the rest goes to the state.
If prospects are revealed to be promising then government royalties can be increased for new comers said Baroudi, adding that "for example a new venture in the Gulf secures up to 95 % of revenues for the state.

Second, political meddling should be stopped. In 1997, Qatar offered to supply liquefied natural gas in 1997 to Lebanon. Had the government started implementing the project "we would have had gas since 2000 saving approximately $ 400 mm a year in today's price terms.
Instead the situation looks grim: "the country has the highest kilowatt energy rate in the region," explained Baroudi.

In 1999, Syria agreed to supply Lebanon with gas should the infrastructure be completed. Again, mismanagement and oil lobbying to block the finalization of the project delayed the construction works of the gas pipeline until 2004. And due to the political turmoil in the beginning of 2005, the Syrian troops' withdrawal was followed by the offer's temporary withdrawal.
"The Syrian PSA is a very favourable one if Lebanon starts executing as its commits Damascus to supply gas at a highest price of $ 24 bpd which saves us over $ 40 per bpd," Baroudi said.

Third, marketing effort should be made to divide Lebanon's offshore into blocks available for tender, said Baroudi.
Meanwhile, Lebanon has precedents in the region in terms of offshore drilling. Egypt started in the beginning of the 1990s and has increased gas production "by almost 50 % between 1997 and the year 2000" thanks to new field discoveries within the Nile Delta region, said Baroudi.

Israel today has three offshore wells, and even Gaza managed to attract British Gas to drill for one as reserves were rumoured to be in excess of 300 bn cf.
"The exploration success rate in the offshore Nile Delta of Egypt, for example, is about 85 %, which is very positive for offshore Lebanese exploration potential," said Baroudi. Also, Lebanon's offshore sea bottom is from the Miocene and Oligocene age, which is the type of soil on which major oil and gas accumulations were found according to Baroudi.

Source: The Daily Star
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