TotalEnergies has recently postponed submitting its final report on drilling results in Block No. 9 to the Lebanese state without any justification. This report was scheduled to be delivered to the LPA delegation in Paris at the end of March before it was canceled for the third time without a new date being determined. The first delivery delay was at the end of February, and the second was in mid-March before it was postponed. The continuing delay in delivery dates sheds light on exploration and production agreements and brings them back to discussion again.
It is essential to say that drilling stopped suddenly at a crucial time because it came a week after the beginning of “Tawafan Al-Aqsa” on October 7, 2023. The drilling stopped at a depth of 3,900 meters under the seabed, while drilling should reach a depth of 4,400 vertical meters (True Vertical Depth sub-sea, TVDss) as an exploratory well by Article 8, 2, c of the Agreement in Blok 9. The reason for stopping declared by the operator does not comply with any of the provisions of the Agreement, especially the provisions of Article 8,6.
Furthermore, the operator shall drill a substitute well for the well that has been stopped drilled, as the well drilled in Block 9 is a part of the minimum work commitment. Note drilling was stopped before reaching any defined objectives of the well, which makes stopping drilling the well equivalent to abandoning it. In contrast, the operator cannot raise the issue of substitute well costs following Article 8.5 mentioned above, as compliance with the minimum obligations under the agreement is a condition of minimum work obligations, not a spending obligation.
It is worth noting that the Agreement in Block 9 stipulates that the number of exploratory wells should not be less than one well (according to Article 8.2 of the Agreement). Meanwhile, exploration and production agreements in other countries stipulate drilling at least three wells. The average exploration rate for productive wells is one in five or 80% found dry, while the productive wells are limited to 20%. Therefore, this condition must be considered in any upcoming exploration and production agreement to increase the number of wells that the operator must drill by no less than 3 in each exploration period.
Submitting the final exploration report must be within 60 days after drilling stops, especially since this date is the focus of the deadlines for Rights Holders and the Government. This deadline was stated in the exploration and production agreements in Blocks 4 and 9, particularly Articles 7 and 10 thereof. But what is striking about these agreements is that they do not contain any articles or provisions specifying a time limit for the operator to submit a report on the results of exploratory drilling carried out in the license block.
Also, none of the articles of the two agreements address the requirement that the operator submit a report on the results of exploratory drilling to the government. Although they discuss the first and second exploration periods in detail, their duration ranges from three years for the first phase to two years for the second phase, extendable for only one year, and the exploration plans for each.
This imperfection requires amending the book of conditions in courses in offshore waters licenses and a sample of exploration and production agreement issued according to Decree No. 43/2017. Appointments must be set for the operator to submit his reports to ensure the smooth functioning of the work.
Some assume that TotalEnergies also abandoned Block 4 in October 2023, returning it to the responsibility of the Lebanese state, with the opportunity to add it to the following licensing cycles. The fact is that according to Article 7.8 of the exploration and production agreement in Block 4, the rights holders (the consortium of companies that obtained the license) are considered to have relinquished the entire Block if they do not submit an exploration plan for the second phase or if the state rejects the plan submitted by them.
The rights holders’ abandonment of Block 4 cannot be due to the lack of gas and oil under Lebanese waters since the consortium was most interested in exploration in the Lebanese EEZ. This interest is evidenced by their submission of two applications to participate in the licensing round for Blocks 8 and 10 less than an hour before the deadline for submitting applications. The hesitation, or even evasion, in submitting the final report on drilling results in Block 9 is nothing less than an attempt to weaken the Lebanese people’s hopes of possessing oil wealth.
The outcomes of the two licensing agreements for Blocks 4 and 9 of EEZ must motivate those in charge of the oil wealth files to rectify the gaps in the book of conditions in courses in oshore waters licenses and a sample of exploration and production agreement referred to above. The oil and gas file responsible must take the initiative to amend the book of conditions and include the articles that regulate dealing with all issues related to oil and gas extracting, whether from the Lebanese mainland or under its waters on the Mediterranean eastern coast.
Here, it is crucial to recall that the Italian company ENI discovered the Zohar field in front of Egypt’s coast in 2015, after 15 years of failed attempts by the American company Shell without any outcome. In comparison, the TotalEnergies exploration attempts in Blocks 4 and 9 are a minor percentage of Shell efforts in Egyptian waters. Nevertheless, what calls for confidence in the availability of gas and oil in Lebanon is the seismic survey of the waters of the EEZ, which shows geological formations suitable for storing oil and gas within it, like the other Mediterranean eastern coast regions.
The continuing deterioration of state institutions and their role loss cannot be justified by the Israeli offensives in southern Lebanon or the continued vacuity in the presidency of the republic for the second year and the presence of a government whose role is limited to caretaker affairs. The management of public facilities must exceed following up on daily aairs to qualify these facilities to keep pace with technological development worldwide. Development is accelerating around us, including all aspects of human life, while our public transaction mechanism is still in the sixties of the last century.
