Mired in power outages, Lebanese look for glimmer of hope in oil excavation

The sovereign fund will be the star of the next phase
Mired in power outages, Lebanese look for glimmer of hope in oil excavation
Lebanon oil exploration

At a time when Lebanon plunges into darkness as a result of the power plant shutdowns and no clear solution to the dispute between the company operating the power plants in Lebanon and the state, the Lebanese were looking for new hope in the drilling rig that reached Block 9 off the coast of Lebanon in preparation for the start of drilling an exploratory well later this month.

Lebanese authorities are counting on natural resources to help them weather the catastrophic fallout from the more than three-year-old economic collapse that the World Bank has ranked among the worst in the world since 1850.

The French company “Total Energy” announced the arrival of the drilling rig after it had revealed last May that it had signed with its partners “Eni” Italy and “Qatar Energy” a fixed contract with “Transocean Partners” to use the drilling rig.

This came after Lebanon and Israel concluded in October 2022 an agreement described as “historic” to demarcate the maritime border after arduous negotiations mediated by the United States.

The company said in a statement that “the Transocean Barents drilling rig has reached Block 9” located “about 120 kilometers from Beirut in Lebanese waters”, AFP reported.

This coincided with the arrival of the “first helicopter at Beirut Airport” belonging to golf helicopters, contracted by Total to transport teams to the drilling rig. The arrival of the two vehicles, according to the statement, “is an important step in preparing for the drilling of the exploratory well in Block No. 9, which will begin in late August.”

As part of a consortium with Russia’s Eni and Novatek in 2018, Total was awarded contracts to explore for oil and gas in blocks 4 and 9 in Lebanese waters before the Russian company withdrew and was replaced by Qatargas earlier this year.

Lebanon divided its exclusive economic zone into ten blocks, the most prominent of which is Block 9, where the Qana field is located, which crosses the demarcation line separating the two parties.

The maritime demarcation agreement with Israel included the Qana field, provided that Israel would receive compensation from the operators of Block 9.

On the sidelines of his visit to the logistics base for the take-off and landing of the helicopter at Beirut airport, Lebanese caretaker Energy Minister Walid Fayyad said that “A new page begins today. When the crew and logistics are ready in a matter of days, drilling will start,” adding, “We are on a date, in two or three months, to know the result of the drilling.”

During the same tour, Minister of Public Works and Transport Ali Hamiyeh hoped to “reach positive and promising results” and that “Lebanon will be on the map of oil countries which is a glimmer of hope for the Lebanese.” According to Total, the exploration process, which will not be easy and at an estimated cost of about a hundred million dollars, must be completed before the end of this year.

Read: When does oil and gas exploration begin in Lebanon?

Sovereign Fund

Sources in Beirut told Economy Middle East that the issue of the sovereign wealth fund stipulated by the oil law will be the focus of a sharp tug-of-war in the coming period.

Last month, the Finance and Budget Committee approved the Lebanese Sovereign Oil and Gas Fund Proposal as “a public institution of a special nature, not subject to the traditional tutelage exercised by governments and the executive authority.”

The sources said that according to global experiences, the fund should not be premature, in the sense that it must prepare for a solid ground for its establishment. The establishment of this type of fund also requires an economic plan that determines the country’s fiscal policy.

The sources added that the establishment of this fund requires governance and the existence of effective constitutional institutions, which is absent today in Lebanon.

“It considers that the figures thrown north and right on revenues from the oil sector are not accurate, and that we must wait until the completion of drilling and exploration.”

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