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Lebanon’s offshore oil and gas licensing deadline looms amid tensions

by Jun 14, 2022Arab News

A tug pulls an Energean floating production and storage ship along Egypt's Suez Canal in June. The arrival of a gas production vessel owned by the company has escalated a territorial dispute between Lebanon and Israel. AFP

Global energy majors are set to bid on Wednesday in Lebanon‘s second offshore oil and gas licensing round.

Companies have until 4pm local time to participate in the tender.

The deadline will be maintained, Walid Nasser, the head of the Lebanese Petroleum Administration that oversees the tenders, told The National.

“We need to wait and see,” he said, addressing concerns from analysts that geopolitical tensions could delay the bids.

A consortium led by French energy company Total won the first licensing round in 2018 but found no commercially viable amount of hydrocarbons.

Lebanon’s Energy Minister Walid Fayad is expected to make an announcement on Wednesday evening or Thursday.

Lebanon and Israel have been engaged in a war of words since a gas production and storage vessel arrived on Sunday in waters that Israel says is part of its UN-recognised exclusive economic zone. Lebanon insists it is a disputed area.

The vessel, operated by international energy company Energean, is expected to begin producing gas in the Karish offshore gasfield for Israel in three to four months.

Hezbollah leader Hassan Nasrallah called for its owners and crew to “withdraw quickly or face consequences”. Aviv Kochavi, Chief of General Staff of the Israel Defence Forces, gave a warning on Sunday about the consequences of a war.

Israel and Iran-backed Hezbollah, which functions both as a regional militia and a political party in Lebanon, last fought directly in 2006 during a 33-day war.

Lebanon and Israel have remained technically in a state of war since the 1948 Arab-Israeli conflict. Israel occupied south Lebanon from 1978 to 2000.

Lebanon has for nearly three years been experiencing a severe economic downturn, caused largely by decades of mismanagement of the country’s finances. Politicians and bankers are bickering over how to reform the financial sector and state institutions in exchange for international aid.

A recent parliamentary election further polarised the parliament.

“I think the whole context in Lebanon, including the economic and financial meltdown, potential political deadlock and geopolitical challenges, is not conducive for investments,” said Mona Sukkarieh, political risk consultant and co-founder of Middle East Strategic Perspectives.

But she said oil companies are used to operating in harsh environments.

“Nothing can be ruled out before the close of the deadline,” she said.

US energy envoy Amos Hochstein arrived in Beirut on Monday afternoon for a two-day visit to discuss, among other issues, the delimitation of maritime borders between Lebanon and Israel.

The two countries have no diplomatic relations.

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