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Khaled Abu Shakra
Yesterday, the deadline given by the Lebanese state to the third partner in the oil consortium, “Novatek”, to give up its share expired. In accordance with Article 36 of the exploration and production agreements relating to blocks 4 and 9 in Lebanese offshore waters, the 20 percent share has become de facto for the state, according to a university professor specializing in energy affairs, Dr. Charbel Skaff. But it seems that the state will not keep it for long. On the same day, Minister of Energy Walid Fayyad expressed a Qatari desire for solutions as a third partner in the coalition. The rush to give up the state’s share is not only due to the material obligations that it must undertake, but also for strategic reasons that the state takes into account.
“According to the law, the state has the right to maintain this share, or to voluntarily assign it to a qualified company, approved by the Council of Ministers. In both cases, there are pros and cons. The state’s remaining as a partner enhances its future profits, in the event that oil and gas are available in commercial quantities. However, on the other hand, The partnership requires it to finance the drilling of wells in the first place, and then contribute to the development of the discovered field,” Skaf says, and “if we assume that the cost of drilling one well ranges between 70 to 80 million dollars, then the state must bear the beginning of 20 in percent of the cost, or an amount ranging between 14 and 16 million dollars, but if the resources are available, the material requirements related to rehabilitation, towing, transportation and other technical matters will rise.”
The state’s ownership of 20% of the oil consortium, it may not mean achieving a high financial compensation in the event that it decides to give it up to a third party, especially since the exploration operations have not started yet, and there is not yet on the ground any tangible physical evidence of the availability of oil or gas in commercial quantities . Accordingly, the process of giving up this percentage, even if it is free of charge to a third party, may be more profitable for the state. On the one hand, it speeds up the start of drilling and exploration operations, and relieves the state of costs, on the other hand, that it is unable to bear today or even in the future. However, according to Skaf, “whether the third party is Qatari or otherwise, this means that there is a positive vision for the future of the oil and gas industry in Lebanon, especially since the first phase of search and exploration costs a lot of money and does not generate revenues.”
In the end, well-informed circles consider that the decision to acquire 20% of the state was strategic, and there is no harm in keeping it at least until a positive discovery is made. Then, the returns rise dramatically from 20% in the event that the state decides to keep it or dispose of it, but the decision in the end is up to the oil policy set by the government.
