Spectrum ASA : New Lebanese Deal Could See License Round Revival

High level talks between the Minister of Finance, Ali Hassan Khalil, a close ally of Parliament Speaker Mr. Nabih Berry, and the Minister of Foreign Affairs, Gebran Bassil have resulted in a consensus between the two ministers. This consensus has led to a request to Prime Minister Tamam Salam to place the Licensing Round on the agenda of cabinet meetings as soon as possible. The intention is to open up the offshore blocks to tender and ultimately award two or three blocks, depending on the quality of the offers which are received.

The next step in re-starting Lebanon's First Licensing Round is for the Lebanese Government to approve the two pending decrees. The first decree delineates the Lebanese offshore area into 10 blocks and the second sets the tender protocol and the model exploration and production agreement (EPA) to be signed between the Lebanese Government and the successful bidders. Both parties also agreed to finalize the taxation Law applicable to oil and gas companies, which now needs to be approved by the Lebanese parliament.[Attachment]

It is expected that the Lebanese Government will approve the pending two decrees within a matter of weeks. According to the Lebanese Petroleum Administration (LPA) 'the deadline to submit bids for the first licensing round shall take place in a maximum period of six months from the date of the adoption of the two decrees'.

In 2013 the LPA undertook a pre-qualification process for oil and gas companies interested in participating in the licensing round. Twelve oil majors were pre-qualified as operators and 34 as non-operators. The Lebanese Offshore Petroleum Resources Law stipulates that, to be allowed to participate, bidders must form a consortium containing at least one operator and two non-operators in order to participate in the bidding process. However, it is expected that a second pre-qualification process will be launched during the period of the tender preparation in case new players want to participate in the Licensing Round.

Extensive seismic surveys showed that offshore Lebanon may have substantial hydrocarbon resources and a recent study by the Lebanese Petroleum Administration (LPA) provides further compelling evidence in support of this.

Prospectivity Report: Offshore Lebanon lies in the extension of the prolific South Levant basin which contains the giant gas fields of Tamar and Leviathan. 30 TCF of gas lies in accumulations that run up to the border; however offshore Lebanon has never been drilled. Intriguingly the Northern Levantine Basin is deeper than the southern part of the basin and in excess of 10,000 m of Mesozoic and Cenozoic sediments are clear on seismic. In this deep basin, the Oligocene and Eocene source rock is buried deep enough to mature oil, making this potentially the most exciting part of the Eastern Mediterranean for exploration. The proven deep water play in the south has been established in massive sands of Early Miocene age, in large anticlinal structures. Spectrum's 3D seismic data reveals in excess of 20 large anticlinal structures, with areas up to 40 sq km, characterized by 3-way dip closure and one-way fault closure to the north at the same Early Miocene level as the Tamar equivalent discoveries. These structures are bigger and less complex than those associated with the recent gas discoveries offshore Israel. Additionally, correlating the objective section from the recent discoveries into the 3D dataset, the Early Miocene section appears to be 3 to 5 times thicker in the North Levant Basin. Plate reconstruction models (e.g. Robertson 1998) support the derivation of these sands from an early Nile Delta, supplying mature, clean sands in huge quantities to the Northern Levant Basin. The recent Zohr discovery of gas in Early Cretaceous carbonates north of the Nile is further support that sands were transported to the east of the Eratosthenes Platform, pouring into and filling the basin offshore Lebanon. Other potentially prospective play types have been identified at various stratigraphic levels, all supported by seismic hydrocarbon indicators such as AVO anomalies, fluid escape features, potential BSR's with free gas amplitude anomalies. Huge hydrocarbon potential eagerly awaits the announcement of the first Lebanon License Round.