Posted on October 23, 2014

Lebanon could become an energy producer earlier than most observers expect, an industry veteran said Wednesday, but only if the right steps are taken to keep the immediate focus onshore, and to insulate the process from domestic political squabbles.

“The offshore deposits will be huge, and Lebanon will one day reap tremendous rewards from them,” said Roudi Baroudi, CEO of Energy and Environment Holding, an independent consulting firm based in Doha, Qatar. “But if we want to get an early start, onshore offers a host of clear-cut advantages. The concessions don’t take as long to map and sell, drilling and other exploratory and extractive operations can start earlier and move faster, and the costs involved are far more modest.”

Baroudi made the comments while offering his take on Lebanon Petroleum Day, a conference hosted jointly on Wednesday by Beirut’s Ministry of Energy and Water (MEW) and the state-run Lebanon Petroleum Administration (LPA). He also noted that the event took place under something of a cloud following the death on Monday of Christophe de Margerie, CEO of French energy giant Total and a legend in the oil and gas business. De Margerie and three others perished when the private jet they were in collided with a snowplow as it was about to take off for Paris from Moscow’s Vnukovo Airport.

“This conference starts with the unfortunate demise of a great man who did so much for the development of this sector, especially by working so hard to bring states closer together for more inclusive cooperation,” Baroudi said. “Even his departure from this world came during such a mission, as he was trying to ensure further achievements for his company by removing obstacles for its work in Russia. Christophe de Margerie had a great impact on our industry, and he will be sorely missed.”

On deciding the right priorities for Lebanon’s energy sector, Baroudi said the twin realities of time and money left little room for doubt. “Onshore concessions could involve a three-year commitment for three-to-five wells, with each costing about $5 million and taking between two and four months,” he explained. “With offshore, you’re looking at $125 million and anywhere from six to 12 months per well.” With such different costs and timelines, Baroudi argued, the two zones should be handled separately so as to avoid unnecessary delays. “The LPA is making good progress on several fronts,” he said, “but the priority now has to be a decoupling of onshore development from the offshore situation,” which has been held up by a complex political deadlock that has paralyzed decision-making and other key functions.   

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The country has been without a head of state since former President General Michel Sleiman’s term ended in May, and a no-holds-barred power struggle between the rival March 8 and March 14 coalitions has prevented the election of a successor in Parliament. To further complicate matters, the legislature is nearing the end of a 17-month extension caused by failure to agree on a new law to govern parliamentary elections that should have been held in mid-2013. Under the extended mandate, polls were to have taken place no later than November 21 of this year, but most observers now expect a new extension to be approved by MPs before that date.   

According to Baroudi, a 30-year oil and gas professional and former consultant to the MEW, the most urgent task is to prepare new maps for at least three or four onshore concessions. Some of the most important raw information for this process is now being gathered in an aerial survey launched in September by California-based NEOS and its local partner, Petroserv. NEOS’ planes are interrogating the area in question with advanced sensors designed to paint a detailed picture based on multiple measurements, including magnetic, electromagnetic, radiometric, gravity, and hyperspectral.     

“By the end of the year, the Data Room at the ministry will have the full 3D subsurface model for exploration and production for these projects, including the crucial Transition Zone along the coast,” he explained. “In addition, the 2D seismic lines currently being executed will be integrated with the aerial project’s multi-measurement interpretation, so companies will be able to buy and examine the data they need before making onshore or offshore commitments.”

But Baroudi, who over the years has helped shape the energy policies of the European Union and several national governments, said Lebanon also had to gets its political house in order to make the most of its opportunity. “However you slice it, this will be a major, major undertaking for a small country with relatively weak institutions,” he said. “Having waiting so long for good news, the Lebanese deserve an efficient start-up, and the best way to do that is for the politicians to set aside their personal interests and work together to form a new national consensus.”