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Lebanon OKs Oil Decrees to Start Stalled Tender Process

Source: Reuters 1/4/2017, Location: Middle East

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Lebanon's new government passed two decrees concerning oil and gas exploration blocks, meaning a tender process for offshore reserves, stalled since 2013, can begin.

Beirut estimates it has 96 trillion cubic feet of natural gas reserves and 865 million barrels of oil offshore, but squabbling between parties has prevented it from kick-starting exploration and development of the sector.

"The two oil decrees have been decided in the first achievement for the government," Foreign Minister Gibran Bassil wrote on Twitter during the first meeting of the new cabinet under Prime Minister Saad Hariri.

The decrees define the blocks and specify conditions for production and exploration tenders and contracts. Full details of these model exploration and production agreements have not yet been published.

The cabinet also agreed to form a ministerial committee to study the tax regime needed for the hydrocarbon industry, and another committee to study a draft hydrocarbon law, Information Minister Melhem Riachi said after the meeting.

In 2013, 46 companies qualified to take part in bidding for oil and gas tenders, 12 of them as operators, including Chevron, Total and Exxon Mobil.

Jeremy Arbid of the Lebanon Oil and Gas Initiative, a non-governmental organization promoting transparency and policy development in the hydrocarbon sector, said it appears those 46 companies will now be able to enter a bidding process.

He said the situation will be clearer when the full decrees are published. Ayham Kamel, Middle East director for the political risk group Eurasia, said delays in oil and gas licensing had undermined confidence in Lebanese policymaking.

"Lebanon had to demonstrate that it is extremely business-friendly and that political issues will not represent a real obstacle," he said.

"The Lebanese Petroleum Administration (regulatory body) is proving responsive to international dynamics but the body needs political support to manage the process and broaden interest in the Lebanese energy sector," Kamel said.

Beirut hopes exploiting the hydrocarbon reserves will help tackle its debt and power shortages, which see most homes go without electricity or rely on generators for many hours a day.

Political paralysis left Lebanon without a president for more than two years. The government was unable to tackle long-pending economic and development issues such as garbage disposal, electricity, water and stock market privatization.

The country is also bearing the costs of hosting more than 1 million refugees from neighboring Syria's civil war. In October, Michel Aoun was elected president in a deal that saw Hariri become prime minister.

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