Russian oil companies are coming to Lebanon
Lebanon is a singular Arab country that does not yet receive any income from the development of the areas of its deposits. However, the government decided not to postpone an important decision any longer. The tender for offshore deposits has already been started. “Lebanon wants Russian business to be presented in our country”, – claimed Lebanon Prime Minister Saad Hariri during the meeting with Dmitry Medvedev.
The Lebanon government announced its plans to let foreign companies into their shelves for the first time in 2013 – concurrent with the conditions for bidders. If the company was aimed at acting as a project operator, it had to confirm the existence of assets worth $10 billion. If it expected a minority stake, the sum was $ 500 million. According to the results of prequalification selection in 2013, only 46 participants were chosen, including Russian Oil Company Rosneft PJSC, NOVATEK PJSC and LUKOIL PJSC, which applied for tenders as minority shareholders. The Minister of Energy and Water Resources of Lebanon confirmed that Gazprom PJSC also participated in the offshore project, but the company gave no comment on this fact.
Source photo: lebanongasandoil
In 2013, the Lebanese authorities intended to distribute 10 blocks of the shelf. These plans were not destined to come true. The tender was canceled because of the political crisis. The global largest fuel and energy companies that passed pre-qualification selection froze in expectations. Only this year, Lebanon again announced the restart of the tender. Moreover, it expressed the readiness to take the results of the previous selection into account.
“The bidding process is already started. It is very likely to be “played out” before the end of the year. The visit of Lebanese Prime Minister Saad Hariri to Russia proves it. In practice, such meetings at the highest level are always significant. They affirm the implementation of the preliminary agreements”, – explains CEO of the audit and consulting group of companies AIP CJSC Sergey Elin. – Tricking or not? To avoid risks, Russian oil companies have updated their bids for the tender. Only Rosneft PJSC stayed aside. The company does not comment its decision to join the offshore project. Gazprom PJSC reaffirmed the interest in the Levantine Basin. Its final decision will depend on the results of company’s current exploration, aiming to find gas in this deposit”.
“The Lebanese Government is currently concluding the first offshore licensing round to initiate exploration activities in the Lebanese exclusive economic zone of the Eastern Mediterranean. This opportunity opens a new door for investments in the Lebanese economy over a wide range of sectors. Lebanese and foreign investors can, starting from now, benefit from the favorable potentials of the new businesses that can stem from the upstream oil and gas activities ranging from upstream oil and gas services to industrial activities and specialized engineering, legal, auditing among others, in addition to the provision of needed goods and equipment for this sector. The Lebanese legal framework indicates that all sub-contracting activities with value exceeding 50,000 USD that the upstream oil and gas companies will perform shall be made through a public and competitive tendering process open for the participation of all interested investors as long as they possess the needed know-how. Although Lebanon is still new to the upstream oil and gas sector, the proven potentials of the Lebanese human capital in the oil and gas sector and beyond open an opportunity for Lebanon to become a regional hub for the service companies serving the oil and gas upstream activities in the East Mediterranean region”, – notifies the Board Member of the Oil Regulatory Committee of the Ministry of Energy of Lebanon Walid Nasr.
The interest of Russian companies in the Lebanese deposits is logical. According to the US Geological Survey, the volume of undiscovered gas reserves in the Levantine oil and gas basin is about 3.5 trillion cubic meters, as well as about 1 billion barrels of oil.
“If the reserves are confirmed, they will be a significant contribution to the global energy sector. It is not surprising that huge Russian companies have manifested interest in the tender. Gazprom PJSC is not an exception on this list. The company is the largest gas producer in Russia with the annual capacity of 450 billion cubic meters. However, its foreign projects are not so great. Lebanon is a golden opportunity to change the situation. Remember 2007! Gazprom PJSC has already got the license for geological explorations in Lebanon. The question of the critical importance is whether the company will manage to increase its resource base in the Levantine basin”, – comments the analyst in ALOR BROKER Yevgeny Koryukhin. He adds that there is a great the number of bidders with big money to join the competition. To purchase the deposit, the company has to pay over $200-500 million. Its following exploration, extraction and development necessarily needs $2-3 billion of additional investment.
The Russian companies that have confirmed their participation in the tender, do not comment in mass media on this matter. However, back in 2013 Rosneft PJSC discussed partnership with ExxonMobil, proposed both the creation of consortium with Total to LUKOIL and bidding as a non-operational partner in the international consortium to NOVATEK public joint-stock companies. “Novatek has already confirmed its intentions”, – proves the Lebanese Minister of Energy and Water Resources Cesar Abu Khalil. The Minister noted that he had already become acquainted with the preliminary report of the first licensing round. The consortium of Total, Eni and NOVATEK is among the applications. Other Russian participants will be known later when the second report is formed.
“The Levantine shelf is a good balance between profitability, risk level and relatively low investments for Russian market players. All the expenses and all the risks will be split among all the participants of the consortium. The minority shares will allow companies to get rid of the problems with gas commercialization. However, at the same time they will bring profitable dividends to their holders” – elucidates Sergey Yelin. – I support, that the political component in this offshore project more important than the economic one. Of course, the development of new hydrocarbon deposits will assuredly replenish the budget of both Lebanon and Russia – because all participants of the tenders are our largest taxpayers.
Nevertheless, there is much politics in the project. The unstable Lebanon needs a strong partner in the geopolitical arena. Russia is the perfect match for this role”. Analyzing the situation from the other side alights that possible partnership with Lebanon on the offshore project may also prove profitable for both Russian oil producers and for the whole Russia. Thus, Gazprom PSJC will strengthen its position in the fuel and energy complex of the planet and confirm its global status. For other Russian applicants, the Levantine basin is an opportunity to gain experience on the shelf, which will be useful both inland and offshore in other countries.
“Competition with the largest international fuel and energy companies will strengthen the Russian market players. It will enable them to become more effective. In addition, the participation in the project will undoubtedly have a positive impact on the operating performance of oil companies. It will also provide them the ability to establish new interstate relations, which can solve another problem – in attracting the various, e.g. financial, resources for the variety of projects in other sectors, – says the Deputy CEO of Finam Investment Company Yaroslav Kabakov. – The maritime project can give a powerful impetus for the further development of the relations between the two countries. It provides the ability to stir the activity in other sectors both in Lebanon and within Russia. Mutual assistance and support of the two countries will increase. The authority and influence of countries in the region will grow. The social bonding between citizens will be strengthened”.
The article is prepared by the first information resource about Lebanon in Russian “MyLebanon” (www.mylebanon.ru).
Author: Anzhela Mikoyan