HomeEnergy & SustainabilityLebanon signs demarcation agreement next week
By Economy Middle East, Economy Editor
SHARE
October 21, 2022 10:58 am

Lebanon signs demarcation agreement next week

Fitch: Lebanon not to receive significant revenues before start of production
The deal allows Lebanon and Israel to explore in the disputed area

If undesirable surprises do not occur, Lebanon is expected to sign the final version of the agreement to demarcate the maritime border with the Israeli side mediated by the United States. US mediator Amos Hochstein is due to visit Beirut next week with a copy of the aforementioned agreement for officials in Lebanon to sign.

Lebanon and Israel do not even have the luxury of time. The term of office of the President of the Republic in Lebanon expires on the 31st of this month, and the President according to the Constitution has the power to sign such treaties. Things don’t seem to be going toward electing a new president soon, as a presidential vacancy is more likely. Thus, this could hinder and delay the course of the agreement.

On the Israeli side, legislative elections will be held on the first of November, which calls for the speedy signing of this agreement under the government of Yair Lapid. Some in Israel oppose the deal, including the Kohelet Policy Forum, which filed a complaint with the judiciary demanding a referendum on it.

The deal, described by both sides as “historic,” allows both Lebanon and Israel to explore for gas and oil in the disputed area of their territorial waters.

Under the new agreement, the Karish gas field will be entirely on the Israeli side, while the agreement guarantees Lebanon the entire Qana field, which crosses the demarcation line separating the two parties.

The Qana field is a key exploration area by France’s Total Energy and Italy’s Eni, which in 2018, along with Russia’s Novatek, secured contracts to explore for oil and gas, before the latter withdrew this year. Walid Fayyad, Lebanon’s caretaker energy minister, spoke of a “Qatari desire”  to enter the alliance and acquire Novatek’s 20 percent stake.

The French company was strongly present in the negotiations that preceded the agreement of the parties to a final version of the document.

A few days ago, a delegation from the French company was in Lebanon, where it announced that a parallel exploration work in Block 9 will begin in 2023.

The delegation briefed those who met them in Beirut, in particular the President of the Republic, Michel Aoun, on the preparations it is making in Lebanon for the start of exploration in Block 9 after the completion of the necessary administrative transactions and procedures.

Without indicating a deadline, the delegation noted that “the drilling rig will be provided starting in 2023 to start exploration in accordance with the provisions contained in the agreement with the Petroleum Sector Authority in Lebanon, which receives successively the data available during the exploration operations.”

For his part, Aoun expressed hope that exploration for Block 9 would begin “quickly” to compensate for the time lost due to indirect negotiations to demarcate the southern maritime border between Lebanon and Israel.

When will Lebanon benefit from exploration?

 

Lebanon is suffering from a severe complex economic crisis that the World Bank has described as among the three worst in the world. An agreement in this regard has boosted hopes that oil and gas revenues will lift Lebanon out of its financial doldrums.

Fitch Solution says that “gas discoveries will produce economic benefits for Lebanon, first by attracting foreign investment, and then by boosting government revenues if it is confirmed that the quantities will be commercial.”

“However, even if the existing quantities are to be commercially viable, Lebanon will not start to receive significant revenues until the production phase begins. This is certainly a process that lasts for years, because production must be preceded by a long path that goes through many stages, including exploration, evaluation, and development of the required infrastructure. This requires time (at least ten years according to the management of the Petroleum Authority of Lebanon) to be completed.”

For his part, the Deputy Prime Minister of the caretaker government, H.E. Al-Shami, who is in charge of negotiating with the International Monetary Fund on a financing program, stressed that the agreement on the  demarcation of the maritime border does not replace the need to move forward with the reforms that Lebanon must carry out as soon as possible, considering that “Lebanon’s assistance by donor countries, including brotherly Arab countries, in the implementation of economic reforms, also contributes to the achievement of the political reform required by many Lebanese and friends of Lebanon.”