Lebanon pins hopes on first oil exploration

The drilling ship Tungsten Explorer is seen off the coast of Beirut, Lebanon, on Feb. 26, 2020. The vessel is scheduled to start later this week the first oil and gas exploration drills off the Lebanese coast. (AP Photo/Hussein Malla)
Short Url
Updated 26 February 2020

Lebanon pins hopes on first oil exploration

  • Tungsten Explorer drilling ship will be docked in Lebanon’s special economic zone to carry out the drilling of the first exploration well for oil or gas
  • French company Total said the drilling will continue for two months off the coast of Keserwan-Jbeil district

BEIRUT: Lebanese President Michel Aoun has described the potential discovery of oil under the country’s seabed as “the initiation of the Lebanese people’s dream.”

In the coming days, the Tungsten Explorer drilling ship will be docked in Lebanon’s special economic zone — about 30 km north of Beirut — to carry out the drilling of the first exploration well for oil or gas.

French company Total said the well located off the coast of Keserwan-Jbeil district “will be drilled at a depth of 1,500 meters from the sea surface. The drilling aims to explore reservoirs located at a depth exceeding 2,500 meters below the seabed.”

The Lebanese are pinning their hopes on the exploration of an area on the seabed called Block 4, which could revive the ailing economy. This event was the central focus of a message delivered by Aoun on Wednesday, in which he said it could “have a positive impact on the national economy and reduce negative repercussions.”

A delegation of officials from Total briefed Aoun on arrangements made “to begin the drilling operation within the next few hours,” according to Rafic Chlala, the president’s media adviser.

The drilling operations could last about two months, according to a company estimate.

The head of Total’s exploration and production in the MENA region, Stephane Michel, said: “If you think the drilling process looks easy, I assure you that it is not the case at 1,500 to 2,000 meters below the seabed. This is very complicated.

“We are doing it in a country where all the legal frameworks have been created. Multiple complex licenses have been prepared. This is a very important task. We are proud to have helped Lebanon take this path in an effective and expeditious manner, and I confirm that everything has been dealt with transparently and efficiently.”

Chairman of the Lebanese Petroleum Administration Walid Nasr said: “The logistics base in the port of Beirut and helicopters at Beirut’s airport are ready for the drilling operations, and all required environmental licenses have been secured in the necessary time.”

Nasr added: “Members of the Lebanese Army, public security and customs will be on board the ship to secure all the requirements for the drilling operations. The drilling operations are estimated to last two months, in addition to two extra months to analyze the results. We hope that the results will be positive, and that we will find oil or gas in preparation for the second stage. Preparations are underway for Block 9, in which drilling operations will be taking place this year as well.”

Drilling operations in Block 9 had been scheduled to begin before Block 4, but Block 9 includes a disputed part with Israel. Lebanon adheres to reaching, through American mediation, an agreement on both maritime and land borders with Israel. Lebanon and Israel are officially in a state of war and there is no demarcation of the land or sea borders between them.

Lebanon had signed contracts with three companies: French Total, Italian Eni and Russian Novatek to explore oil and gas in two areas in regional waters. Last April, a second licensing course for oil and gas exploration was launched in five other areas.

US Ambassador to Lebanon Elizabeth Richard said during her meeting with Aoun on Wednesday that the US supports Lebanon, considering that it “has reached a turning point.”

Richard said in a statement: “There is no reason why this country — that has many blessings, including amazing human resources — not to have a modern waste management system, 24/7 electricity for all, as well as one armed force under the state’s control, and a growing economy, in 2020.”

The US diplomat added: “Difficult decisions must be made, and everyone will have to bear some burden. It is an opportunity to chart a new path that will make this country realize its full potential as a modern and prosperous member of the international community.”


Make or break days for global oil ahead of OPEC crunch meeting

Updated 25 min 22 sec ago

Make or break days for global oil ahead of OPEC crunch meeting

  • OPEC, led by Saudi Arabia, were on Thursday scheduled to take part in virtual discussions with non-OPEC members, led by Russia, about a possible deal to revive the OPEC+ alliance
  • On Friday, energy ministers from the G20 nations, under the presidency of Saudi Arabia, will convene in another digital forum that will bring in the third part of the global oil equation – the US

DUBAI: The global energy world, in the midst of crisis as demand slumps to unprecedented levels due to the coronavirus disease (COVID-19) pandemic, faces two days that could make – or break – the oil industry for months to come.
Leading producers from the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, were on Thursday scheduled to take part in virtual discussions with non-OPEC members, led by Russia, about a possible deal to revive the OPEC+ alliance that fell apart in Vienna at the beginning of last month.
Then, on Friday, energy ministers from the G20 nations, under the presidency of Saudi Arabia, will convene in another digital forum that will bring in the third important part of the global oil equation – the US, currently the biggest oil producer in the world.
If no deal is reached from the two days of oil summits, the immediate prospect looms of a further fall in crude prices and, with global storage facilities already filling rapidly, the possibility of major exporters “shutting in” oil fields, jeopardizing future production.
Energy experts say the purpose of the meetings is two-fold: To reach agreement on how to limit the vast quantities of oil that are still being produced even as demand collapses; and to present some kind of united front in geopolitical terms in the face of the biggest economic recession since the 1930s.
The most visible immediate sign of any success from the meetings will be an increase in the price of crude oil on global markets. Brent crude, the Middle East benchmark, has lost nearly half its value in the past month.
The first aim – to try to balance oil supply and demand – is the more difficult. Global demand has fallen by at least 20 per cent from the usual daily consumption of around 100 million barrels, oil economists have calculated.
But, following the collapse of the OPEC+ deal that was putting a lid on supply, all producers have been pumping more crude. Saudi Arabia is producing more than 12 million barrels per day (bpd), a bigger volume than at any time in its history. All OPEC members, as well as Russia, have said they will increase output.
In this stand-off, US President Donald Trump intervened last week to say that he had spoken to Saudi and Russian leaders and that he “expected” a cut of 10 million, possibly even 15 million, bpd.
That looks like wishful thinking. For one thing, it would not rebalance markets. Anas Al-Hajji, managing partner of US-based Energy Outlook Advisers, said: “The amount of the cut is relatively small given the major drop in demand.”
There are also some difficult relationships to smooth over in the OPEC+ alliance. Saudi Arabia and Russia exchanged angry statements last weekend, each accusing the other of starting the oil price war. Iran, with big reserves but hampered by US sanctions from exporting in large quantities, said that it might not take part in the conference.
The choreography of the two meetings also presents hurdles. The US will not be present at the OPEC+ meeting, but American Secretary of Energy Dan Brouillette said he would take part in the G20 event.
Because it is a free-market industry, America cannot order its oil producers to reduce output, but most analysts are agreed any attempt to rebalance global supply would be impossible without a US contribution.
By going first, Saudi Arabia and Russia are “playing blind” without knowing what the Americans are thinking. Neither would want to agree big price-restoring cuts only for US producers – under big financial pressure at current levels – to swoop back into the market.
This week there have been some signs that the Americans are considering their own versions of cutbacks. The biggest US company, Exxon Mobil, said it would reduce capital expenditure on future projects by 30 percent; the US Energy Information Administration said oil production would fall by nearly 1 million bpd this year, in response to falling demand and financial pressures.
But even if the Saudis and Russians cut substantially alongside other big OPEC producers such as the UAE, and the Americans enter a long-term pattern of falling demand, it is still hard to see how cuts could reach the 10 million barrels Trump “expects,” let alone 15 million.
J. P. Morgan, the big US investment bank, said that it expects OPEC+ to come up with combined cuts of about 4.3 million barrels, most of that coming from Saudi Arabia, Russia and the UAE. “If it’s 4.3 million it only puts off the day when global storage gets filled completely,” said Robin Mills, CEO of Qamar Energy consultancy.
Storage facilities are nearly at the brim. Malek Azizeh, director of the premium facilities at the Fujairah Oil Terminal in the UAE, joked that he was going to hang a sign on the terminal gates: “Thanks, but no tanks.”