Update 2: An gas field near Lebanese waters valued $76 Billion

30Dec10

The recent discoveries of massive gas fields off the coast of northern Israel, tantalizingly close to Lebanese coastal waters, has stirred cash-strapped Lebanon to accelerate efforts to begin its own oil and gas exploration. But the prospect of previously undiscovered fossil fuel riches off the coasts of Lebanon and Israel risks becoming a new source of conflict as well as an economic windfall for the two warring neighbors.

This is something big and potentially landscape-changing economically, financially, and politically,” says Nassib Ghobril, head of economic research and analysis at Banque Byblos in Beyrouth

Huge natural gas reserves claimed by Lebanon and Israel could spark the next round of fighting between the two warring states.

Lebanon recently accused Israel of attempting to siphon natural gas from reserves off its northern coast that Lebanon says extend under territory rightfully controlled by Lebanon. Israel has denied this claim, maintaining the the field falls between Israel and Cyprus, with which it has reportedly worked out a deal to pay royalties in exchange for drilling.

Legally speaking, the field lies beyond the territorial waters of either country, which only extend 12 nautical miles (about 14 statute miles) offshore. Countries can declare an exclusive economic zone up to 200 nautical miles from shore, but neither country appears to have done so.

Disputes like this are usually either worked out between the two countries or settled in international arbitration. But as enemy states, Lebanon and Israel could not come to such an agreement, and until Lebanon comes up with enough cash or investors to do its own oil and gas exploration, there isn’t much it can do.

Which is why Berri is pushing the proposal for offshore exploration to counter Israel’s claim to fields, which has also yielded preliminary evidence of oil.

“Lebanon must take immediate action to defend its financial, political, economic and sovereign rights,” Berri told parliament earlier this month. “Israel is racing to make the case a fait accompli and was quick to present itself as an oil emirate, ignoring the fact that, according to the maps, the deposit extends into Lebanese waters.”

The U.S. and Israeli companies that hold rights to the Leviathan and two other drilling sites plan to start fuel production by 2012. Israel is hoping the reserves will make it energy independent and transform its economy, while Lebanon sees the possibility of oil and gas wealth as a way to pay off its $45 billion debt.

While the Israelis already have firms drilling for gas, the steps the Lebanese Government must pursue:

  • It must identify blocs for exploration,
  • supply data to interested investors,
  • select bidders and have companies start work.

Update 1: The UN will help Lebanon delineate its maritime borders in order to exploit oil and gas reserves, the UN envoy to Beyrouth said on Monday.

There may be a role for the UN and we have to discuss it with UN’s lawyers in New York,” Williams told reporters following talks with Lebanese Foreign Minister Ali Shami, “but I think it is important that this issue moves forward.

Update 2: Lebanese lawmaker Ammar Houri said in a news conference Monday that Norwegian firm PGS surveyed an area of 2,350 square kilometers of Lebanon’s exclusive economic zone and the results were promising.

“The results were better than expected since it implied that there were good signs and possibilities of having oil and hydrocarbon deposits in Lebanon’s economic zone,” he added.

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