Broad Hopes: Why Is Lebanon Anticipating Positive Outcomes From Oil and Gas Exploration in Its Waters?

Amid popular and governmental anticipation, Lebanon has embarked on its first practical steps toward oil and gas exploration in its waters as part of the maritime border demarcation agreement with “Israel,” signed in 2022.

Lebanese citizens hope for positive outcomes from this exploration, which they expect will help lift the country out of its economic crisis that has persisted since 2019.

 

Exploration Mission

On August 16, 2023, the French company TotalEnergies announced the arrival of a drilling platform at Block 9, located off the coast of Lebanon, in preparation for commencing exploratory drilling. The company stated in a press release that the drilling platform, Transocean Barents, had reached Block 9, approximately 120 kilometers from Beirut in Lebanese waters.

Simultaneously, the first helicopter arrived at Beirut Airport, operated by Gulf Helicopters, which had been contracted by TotalEnergies to transport teams to the drilling platform.

According to the statement, the arrival of both assets marked a significant step in preparing for exploratory drilling in Block 9, set to begin in late August 2023.

In May 2023, the company announced the signing of a fixed contract with Transocean Barents for the use of the drilling platform in partnership with the Italian company Eni and QatarEnergy.

This development followed the historic maritime border demarcation agreement between Lebanon and “Israel” signed in October 2022, after challenging negotiations mediated by the United States.

Lebanon’s acting Minister of Energy, Walid Fayad, considered this step, which came after settling Lebanon’s maritime border dispute with “Israel,” as a “new chapter.”

While visiting the logistics base for helicopter takeoffs and landings at Beirut Airport on August 16, 2023, Fayad confirmed that drilling would start in the coming days once the crew and logistics were prepared.

He added: “We are on schedule, and in two or three months, we will know the drilling results.”

On the same occasion, Lebanese Minister of Public Works and Transport, Ali Hamie, expressed his hope for “positive and promising results” and wished for Lebanon to “join the map of oil-producing countries, offering hope to the Lebanese people.”

TotalEnergies, in a consortium with Eni and the Russian company Novatek, secured contracts for oil and gas exploration in Blocks 4 and 9 in Lebanese waters in 2018. However, the Russian company later withdrew, and QatarEnergy took its place at the beginning of 2023.

 

Anticipated Wealth

Lebanon divided its exclusive economic zone into ten blocks, with Block 9 being the most prominent, housing the Qana field, which extends beyond the demarcation line between Lebanon and “Israel.”

The agreement grants Lebanon rights to the Qana field, with “Israel” receiving compensation from the operators of Block  9.

However, some experts believe Lebanon is still far from extracting its oil and gas resources, which may take five to six years, making it appear significantly behind Israeli efforts to invest in its regional waters.

In a country plagued by corruption in its institutions and accusations of embezzlement of public funds by its officials, many question whether extracting these resources will yield profits that help boost its economy.

Nonetheless, with global demand for gas on the rise, driven by the energy crisis triggered by Russia’s invasion of Ukraine on February 24, 2022, Lebanon hopes that any offshore discoveries will contribute to alleviating the severity of its economic collapse.

This collapse has pushed the majority of Lebanon’s population below the poverty line, eroding their purchasing power and witnessing the continuous devaluation of the currency.

 

A Decisive Wait

The drilling will determine whether Lebanon can be considered a country capable of relying on its oil and gas production, entering the development and production phase for Block  9.

This comes especially after exploratory drilling operations were conducted in Block 4 in 2020, yielding no results despite substantial financial investment.

At the time, data collected from the first well in Block 4 contributed to improving the accompanying analysis for exploration efforts in Block  9.

The total estimated reserves of Lebanese offshore oil stand at 865 million barrels and of gas at 96 trillion cubic feet.

A seismic survey conducted by the British company Spectrum in a limited maritime area in 2012 estimated Lebanon’s extractable gas reserves at 25.4 trillion cubic feet, although Lebanese authorities have presented higher estimates.

Lebanon has long aspired to leverage potential resources in its regional waters in the Mediterranean Sea.

However, it has encountered obstacles after conflicting claims from “Israel,” a country that Lebanon still regards as being in a state of war and with which it maintains no official communication.

Today, Lebanon hopes that gas and oil discoveries will help it overcome a crippling economic crisis that has devalued the local currency by over 98%, eroded the country’s foreign reserves, and led to near-constant power outages in towns and cities on a daily basis.

Assuming an abundance of gas, it will take years before the revenues reach the state’s coffers, at a time when some fear that the pervasive corruption that has characterized Lebanon’s governance system may prevent the funds from benefiting approximately three million people living below the poverty line.