What are Lebanons oil and gas prospects Mounir

What are Lebanon’s oil and gas prospects Mounir Rached March 2016 1

I. FACTS Much has been said regarding the prospects for oil and natural gas in Lebanese waters. Extensive surveying — the entirety of the country’s offshore waters has been spanned by 2 -dimensional seismic surveys while 70 percent has been covered by the 3 dimensional kind 2

FACTS • Has resulted in the identification of the zones most likely to contain recoverable hydrocarbons, drawing interest from 46 companies that prequalified to bid in Lebanon’s first offshore licensing round. 3

FACTS The results of surveying suggest the different zones contain gas reservoirs at different depth: biogenic gas is formed at shallow depths and low temperatures by bacterial decomposition of organic matter, suggesting lower costs in drilling and extraction. Thermogenic gas, in contrast, is formed at greater depths through thermal cracking of decomposed organic matter or oil into gas — where molecular bonds are broken due to high heat and temperature — suggesting higher costs in drilling and extraction 4

FACTS To better appraise how much gas or oil an area might produce, experts use what are called P 50 calculations. These show a middle of the road estimate for the volume of gas or oil, and are the norm for projecting exploration success so as to manage expectations. 5

FACTS The results of surveying suggest the different zones contain gas reservoirs at different depth: biogenic gas is formed at shallow depths and low temperatures by bacterial decomposition of organic matter, suggesting lower costs in drilling and extraction 6

The Levant basin prospectively the US geological survey estimated 1. 7 billion barrels of recoverable oil and 122 trillion cubic feet of recoverable gas in the Levant basin 7

II. PROSPECTS • Lebanon’s share of oil could be one-fourth • i. e 425 million barrels • Less than 2 months of saudi Arabi’s production 8

• • Lebanon’s gas potential is 30 TCF Equivalent to 5 billion barrels of oil. Every 6000 CF= 1 barrel of oil Equivalent to 14 years of production at 1 million barrels per day 9

The Levant basin assessment results 10

What does this mean in practice? • Frontier Hydrocarbon province : well covered with the Geophysical data and under-explored • Recent gas discoveries of 35 Tcf in Levant basin • Europe yearly demand in 2020 estimated at 20 Tcf • 35 Tcf = 8% of the European demand in 2020 for 20 years 11

Lebanon’s 2 D and 3 D Offshore data (source LPA) • • • The entirety of the country’s offshore waters has been spanned by 2 -dimensional seismic surveys while 70 percent has been covered by e 3 dimensional seismic surveys The surveys have resulted in the identification of the zones most likely to contain recoverable hydrocarbons 46 companies were prequalified to bid in Lebanon’s first offshore licensing round 12

Results of the seismic surveys • The results of surveying suggest the different zones contain gas reservoirs at different depth: – biogenic gas is formed at shallow depths and low temperatures by bacterial decomposition of organic matter, – Thermogenic gas, in contrast, is formed at greater depths 13

Prospects. . • . Thermogenic gas is formed at greater depths through thermal cracking of decomposed organic matter or oil into gas — where molecular bonds are broken due to high heat and temperature — suggesting higher costs in drilling and extraction 14

Prospects. . A Lebanese Petroleum Administration (LPA) map from 2012 shows where the greatest potential to find resources may exist. The results of seismic surveying have resulted in assessments which companies can use to drill exploratory wells and thus test projections of reserves in Lebanon’s exclusive economic zone. 15

Prospects: Where will that place Lebanon on the petroleum map? • Until drilling in Lebanese waters occurs, 100 percent accurate figures on what lies below the waves cannot be confirmed. • No amounts for oil or gas can be confirmed until exploratory wells are drilled. • Iran — the world’s leader in proven gas discoveries — stands at 1, 192. 9 tcf at the end of 2013, according to the BP Statistical Review of World Energy June 2014. 16

Prospects • Lebanon might only find a fraction of this 1, 192. 9 tcf. • Lebanon will have to wait before needed decrees are passed, allowing companies to come explore the country’s exclusive economic zone. 17

Prospects: Relative importance of Lebanon 18

Division of zones according to the geophysical qualities • Seven zones are delineated according to geological similarities • Probability of success for the zones has not been projected, 19

Lebanon’s offshore Block delineation (source LPA) 20

P 50 calculations • • To show a middle of the road estimate for the volume of gas or oil experts use what are called P 50 calculations For instance, a P 50 of 10 trillion cubic feet (tcf) of gas means that, based on all available evidence, experts predict that the probability of finding at least 10 tcf to be 50 percent The more conservative P 90 and optimistic P 10 calculations can also be used to bracket expected outcomes. the LPA outlined the P 50 for offshore blocks one, four and nine: – In block one, the P 50 for natural gas is 14. 9 tcf and +440 million barrels (mmbbl) of oil; – in block four the P 50 projection is 13 tcf and +425 mmbbl – in block nine the P 50 is 15. 2 tcf. 21

Prospects The seven zones are delineated according to geological similarities and characteristics of different petroleum systems (the geophysical qualities essential for oil or gas to accumulate). In referring to this map, exploration probability of success for the zones has not been projected, nor do the zones directly relate to the 10 proposed offshore blocks. 22

Prospects For now, these indicators are very encouraging. But no amounts for oil or gas can be confirmed until exploratory wells are drilled. Lebanon will have to wait before needed decrees are passed, allowing companies to come explore the country’s exclusive economic zone. 23

III. Laws & Decrees • Law 132/2010 • Decree 10289/2013 draft 24

IV. Oil & gas revenue options • • • Give out to public ( as in Alaska) Build the economy Repay debt Sovereign fund (save revenue) Or a mix of any of the above Thank You 25