ExxonMobil interest offers East Med bid round fillip
Recent reports that ExxonMobil is considering taking part in Israel’s ongoing second international licensing round have given a major publicity boost.
Meanwhile, Beirut also prepared to tender additional licences, hoping to profit from recent large finds elsewhere in the Eastern Mediterranean. Like Israel, Lebanon received a disappointing response to a debut upstream auction in 2017.
The country’s foreign minister somewhat unhelpfully re-inflamed a maritime dispute between the hostile neighbours, reminding prospective investors of the multiple political sensitivities at play in regional resource development.
Israel’s first international offshore bid round concluded in late 2017 with only six blocks awarded of the 24 on offer to the two sole bidders. Greece’s Energean won five licences close to the company’s existing acreage in the north of the country’s Exclusive Economic Zone (EEZ), while the sixth went to a consortium of Indian parastatals.
A second offshore auction was launched in November. The authorities attempted to make the structure more alluring by grouping the 19 blocks offered into five clusters of contiguous acreage and incentivising the acquisition of multiple licences within each grouping. Nonetheless, concern over the lack of firm supply outlets for any gas unearthed remains a deterrent.
Bids are due in June, with awards envisaged the following month.
Tel Aviv’s existing upstream gas industry is dominated by the US’ Noble Energy and the local Delek Group. None of the majors are thought even to have expressed interest in the debut bid round despite the presence in Israel’s territorial waters of the giant Leviathan and Tamar gas fields.
However, reports emerged this month that ExxonMobil had purchased the data package and had discussed participation with Israeli Infrastructures, Energy & Water Resources Minister Yuval Steinitz during the high-profile CERAWeek industry conference in Texas. During the event, the minister publicly appealed for US support for his country’s gas export ambitions.
The interest from the world’s largest publicly listed oil company was billed in some quarters as a landmark, because majors had previously shunned investment in Israel for fear of damaging relations with oil-rich Arab states.
ExxonMobil has major upstream interests in Qatar and the UAE and strong downstream ties with Saudi Arabia.
The notion that GCC governments would punish the company for doing business with Tel Aviv has become highly improbable in recent years. Riyadh and Abu Dhabi have been quietly building relations with Israel as a counter to Iran.
Meanwhile, Doha’s determination to maintain a reputation as a reliable investment partner to the host of IOCs involved in its world-leading LNG industry far outweigh the desire to make a gesture towards Arab solidarity.
However, ExxonMobil’s rumoured interest in the acreage on offer is welcome for its potential to encourage other firms to look more seriously at the auction. The super-major’s increasing activity in the Eastern Mediterranean was rewarded in February with the discovery of the major Glaucus field off the coast of Cyprus.
That investment also signalled the company’s willingness to defy regional political sensitivities. Ankara has objected vocally to the unilateral apportionment of upstream rights by the internationally recognised Greek Cypriot government.
Tel Aviv likewise reacted angrily to Lebanon’s inclusion and award, in the country’s first licensing round, of three blocks infringing on an 860-square km triangle of disputed territory straddling the countries’ shared maritime border.
Beirut only awarded two of the five blocks it had offered out of these: Block 9 was among those at issue. The winner, and sole bidder, was a consortium led by France’s Total with Italy’s Eni and Russia’s Novatek.
Undeterred, Beirut unveiled plans in November for a second auction. This is provisionally envisaged re-offering two of the contentious licences (8 and 10), as well as Block 1 and Block 5, respectively in the north-west and south-west of the EEZ.
The timetable outlined at the time by the Lebanese Petroleum Administration, an agency of the Ministry of Electricity & Water, envisaged launching the round and issuing an invitation to prequalify during the first quarter. Around four months were allotted for submission of applications and six months from publication of the Tender Protocol to form consortia and submit bids.
The first bid round was delayed for years because of the lack of a permanent government in the politically unstable country and another lengthy period under a caretaker administration only ended in late January. Reports in mid-March suggested that the prequalification process would now be initiated within weeks.
Like Israel, Lebanon hopes to benefit from the bullishness around the East Mediterranean’s prospects engendered by recent major finds such as Glaucus and Eni’s Nour field off the coast of Egypt.
However, the concern for potential operators in either country’s territory over the lack of supply outlets and the political controversies aroused by potential cross-border projects was justified by Lebanese Foreign Affairs Minister Gebran Bassil in early March.
He revealed that he had written to the UN, the EU and the national governments of the countries involved warning about the route of the proposed East Med Pipeline. Bassil said that the conduit, which would run from the Israeli EEZ via Cyprus and Crete to mainland Greece and Italy, should not infringe on Lebanese maritime territory, presumably in reference to the disputed border area.