By Antonia Dimou*
Originally Published by Modern Diplomacy,
January 12, 2017
(Photo from Modern Diplomacy)
The East Mediterranean’s gas resources
can promote cooperation, resolve conflicts and turn the region
into an energy hub presenting new
prospects for Lebanon and Syria.
Lebanon is currently in need to diversify its
energy mix away from oil in order to strengthen its security of supply but lags
behind neighboring Israel and Cyprus in developing its gas reserves in the East
Mediterranean. 3D seismic surveys carried out by the Norwegian Spectrum company
have estimated recoverable Lebanese offshore gas reserves at 25.4 trillion
cubic feet. The development of Lebanon’s hydrocarbon resources nevertheless
faces significant challenges at political and economic levels, namely the
skyrocketing public debt, an unstable regulatory framework, and a weak
administration attributable to the sectarian nature of the country’s political
system.
The January 4th 2017 approval by the
Lebanese cabinet of two decrees is considered critical to ignite the engines of
gas exploration and production given that they provide
the delineation of
the offshore area into 10 blocks; the
establishment of production-sharing contracts; the specification of tender protocols; and, the model exploration and porduction agreement
(EPA)
so that the first licensing round for offshore gas exploration becomes feasible and Lebanon catches up energy synergies in
the East Mediterranean.
The commercial
attractiveness of Lebanon’s gas resources is evidenced in the registration of
interest by twelve operators and major oil companies such as Chevron,
ExxonMobil, Shell, and Total in the prequalification round of 2013. But two main prerequisites are
critical for the transformation of the Arab country into a gas producer. First, the
Lebanese government
needs to be held accountable and push for effective
public consultation in that the bidding process is transparent and that
contracts are sufficiently completed. Second, anti-corruption safeguards for the gas
industry in Lebanon are necessary to be created to standardize binding rules for licenses and
contracts with: (a) penalties on companies which provenly secure contracts through
bribery; and, (b) the ability of companies to exercise supervision over one
another for competitive reasons. Anti-corruption
mechanisms can also include the
creation of sovereign funds that take part of the gas profits and allocate them
to the development of infrastructure projects and to the decrease of national public debt thus favoring economic growth.
On a broader regional setting, existing overlapping
maritime claims between Lebanon and Israel over an 854 square kilometers area are hampering trans-boundary gas sharing
initiatives on exploration and production. American mediation efforts thus far
have failed to resolve the maritime dispute but reduced the risk of escalation
by succeeding in dispiriting Lebanon and Israel from exploring gas fields and
awarding contracts. The
delineation of the maritime border is notably crucial for gas exploration given that oil
and gas companies assess security and political risks before investing.
Also interestingly, delays
in the Lebanese decision
making process can close market-transformative opportunities, hinder joint
monetization with Egypt and possibly Cyprus, and accelerate competition with
new entrants in the regional gas market, such as Iran and Australia. For the
conclusion of long-term gas supply contracts, the discovery
of sufficient gas quantities in the ten blocks of the Lebanese maritime area is
important. This is especially crucial when taking into account that by the time
Lebanon
comes on stream, a major gas market share will be locked up, thus limiting the Arab country’s ability to create gas
price competition. No doubt that in
the existence of a compact regulatory framework and a strong political
leadership, regional energy arrangements will not likely bypass Lebanon.
Coming to neighboring war-torn Syria, the country can prove to be a sigificant regional
energy player. Damascus overall undiscovered gas potential looks promising in accordance with
French CGGVeritas’
acquisition of 2D seismic data on offshore Syrian resources in 2005 and
subsequent 2011 evaluation that three offshore blocks in the Mediterranean Sea
by the Syrian coast are expected to hold multi trillion cubic feet of gas.
Among various interests, geopolitics of energy seem to
dominate the crisis in Syria. Foreign powers battle control of natural gas
resources and the trade routes that bring energy to consumers. Conflicting
energy interests in Syria are demonstrated by Russia, Qatar and Iran. Russia
seeks to maintain investments in the energy sector in so-called “Safe Syria,”
which is a promising zone of natural gas reserves in the territorial waters off
Syria’s Mediterranean coast. The significance that Russia attributes to joining
the East Mediterranean energy game is underlined by the fact that energy giant
Gazprom has reportedly taken over the gas exploration and drilling rights off
the Syrian coast from Russian state-controlled Soyuzneftegaz, which in 2014
signed a 25-year agreement with the Syrian government that concedes exclusive
exploration rights in Syria’s EEZ.
Qatar’s energy agenda in Syria contradicts Russian and
Iranian interests as it includes a pipeline that would connect Qatar and Turkey
through Syria, in order to join the Nabucco pipeline and ultimately reach
Europe. For its part, Iran’s energy strategy centers on the Iran-Iraq-Syria
Islamic pipeline project, originally signed in 2011. The project is intended to
transport Iranian gas through the Gulf to Iraq, then to Syrian and Lebanese
ports, with Europe as the final destination.
Noteworthy, Syria contains a number of gas fields that
have been periodically seized by the Islamic State, principally in Palmyra, a
city that serves as transit for pipelines carrying gas from fields in Hasakah
and Deir Ezzor provinces in northeastern and eastern Syria respectively. The regime’s
control of Shaer field, the largest field northwest of Palmyra that feeds the
national grid, is considered significant because it impedes the Islamic State
from amassing further disproportionate rewards compared to its limited
investment of combat manpower.
The “pipelization” of Syria is a reported reality.
Thus all efforts should direct to the resolution of the Syrian conflict as a
prerequisite not only for the
development of the country’s untapped offshore gas resources but most
significant for attracting foreign investment.
No doubt that as the cases
of Lebanon and Syria show, potent decision making, cooperation and conflict
resolution are critical for the region’s gas potential to be unlocked in a way
that promotes economic growth and sustainable development for the benefit of
current and future generations.
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