For over a decade, the United States has aimed to mediate between Lebanon and Israel to amicably resolve a maritime border dispute over 860 square kilometers of waters between the two countries. The mediation was accelerated over this past summer, as tensions over gas extraction reached an unprecedented level, with leaders on both sides threatening severe consequences if production operations around one of the disputed fields continued without solving the maritime borders dispute. US mediator Amos Hochstein, who has become President Joe Biden’s focal point on energy security following Russia’s invasion of Ukraine, went on more than four official visits between Lebanon and Israel with the aim to reach a suitable agreement for all parties.
Production operations over the summer took place in the Karish field, which was discovered back in 2013 and had been into development phase since then. Back in June 2022, a floating production storage and offloading ship operated by the Greek-Israeli company Energean arrived at the Karish field and hook-up for commissioning operations. A few kilometers away, on the Lebanese side, a prospective field named “Qana” was identified in Lebanon’s offshore exploration Block 9, following years of seismic surveys and explorations activities, and was licensed in 2018 to a consortium formed by energy companies Total, ENI, and Novatek, without having any drilling activity in the location.
On October 11, 2022, Lebanese and Israeli officials accepted the final version of the maritime border deal delivered by Hochstein to delimit the two countries’ territorial seas and Exclusive Economic Zones, giving the full ownership of the Karish field to Israel while keeping the Qana natural gas prospect under Lebanese sovereignty. The official signature on the US proposal then followed on October 27 at the UN headquarters in Naqoura in south Lebanon, just days before the end of the Lebanese president’s mandate and Israeli legislative elections.
The drivers of this deal
Since its signing, the agreement has been described by international media as a historic achievement which will advance security, stability, and prosperity for the region.
Two main factors contributed to the closure of this dispute, and to reaching a win-win outcome in the current political and geopolitical timing in the region. The first was mainly Europe’s need for additional gas supply during this winter, and the upcoming ones, as deliveries from its major supplier Russia dwindled in the wake of the war in Ukraine. Although the Israeli gas that will flow from Karish will not be sufficient to fill Europe’s need in gas, the continent’s countries and its commission are looking for long-term Liquified Natural Gas (LNG) agreements from other sources, and have allocated $709 billion across European countries to shield consumers from the rising energy costs. Gas flowing from Israel to Egypt, where it will be liquified and then shipped to Europe is one source for such alternatives.
In June, the European Union, Israel, and Egypt signed a deal to boost Eastern-Mediterranean gas exports to Europe, a first in allowing significant exports of Israeli gas to the continent. It also aims to expand LNG shipments via Egypt. This complements the Israeli Energy Ministry’s announcement on February 16, 2022 that a new route to export natural gas to Egypt via Jordan was approved.
The EU gas storage is filled at 95 percent capacity—far more than the pledged 80 percent by November 1—which means that the current winter is expected to pass smoothly in most countries of the continent. Filling continues ahead of winter to avoid industry shutdowns and power rationing, which shows Europe’s urgent need for continuous supply of gas not only for this winter but for the winters to come. Therefore, the Eastern-Mediterranean gas constituted part of the geopolitical game.
The second major driver of the deal was Hezbollah’s indirect intervention in the negotiations as of June-July of this summer. On July 2, the party sent three drones to the Karish gas field, which were shot down by Israel, and tensions mounted after this incident, sending bilateral threats and messages. Israel, and behind it the United States, was not ready to go into a security escalation which would not only put Karish’s commercialization at risk, but also threaten the other surrounding active fields in the region.
Before Hezbollah’s interference, some of the Lebanese political elites handling the maritime borders negotiations file were ready to waive more maritime rights and resources, and agree on something less than the agreed-upon Line 23, the demarcation line officially put forward by the Lebanese government back in 2011 under Decree 6433. Hezbollah’s interference strengthened, in one way or another, Lebanon’s official position toward agreeing on a basis for the negotiations converging around Line 23, Lebanon’s sovereignty over all its southern offshore blocks, and the rejection of any proposal for production sharing agreements.
What do we know about the agreement?
Of what we know so far, one thing is certain: the deal Lebanon signed on October 27 is less than what it deserves from both a technical and legal point of view, according to the United Nations Convention on the Law of the Sea (UNCLOS) and the related maritime laws.
The newly agreed upon maritime boundary largely corresponds to Line 23, the official demarcation line suggested by the Lebanese government in 2011. Through the years, the Lebanese army conducted in-depth studies and field surveys regarding the maritime boundaries: between 2019 and 2020, it proposed an updated study claiming Lebanon’s ownership of more territory including at least half of the Karish field, based upon a line which was then known as Line 29. Yet, despite being backed by the former President Michel Aoun back then, Decree 6433 of 2011 was never ratified to align with Line 29’s coordinates, and a consensus among the country’s president, prime minister, and parliament speaker started to gradually leave this line behind. It first put an end to the army’s technical role and team as of the summer 2021 moving it into the hands of MP Elias Bou Saab, and second it considered the army’s proposal (Line 29) as a negotiation line and not as a claimed right.
A general overview of the agreement’s articles clearly shows that it gives much more discrete benefits to the Israeli side rather than the Lebanese one, both on the short-term and long-term run. In fact, Israel received full ownership of the Karish field where the production of gas was officially started on October 26. On the other hand, the deal states that the Lebanese-appointed operator, TotalEnergie, will explore and exploit the Qana Prospect “exclusively for Lebanon,” based on a financial agreement to be reached with Israel that ensures the latter would get compensation for its rights in the deposit. Questions arise here on the possibility of not reaching consensus on this financial agreement, and therefore putting exploration at risk. In addition, the agreement does not refer to a procedure to be followed if negotiations between TotalEnergie and Israel on the Qana prospect’s commercialization reach a deadlock, while relying on the mediator’s continuous intervention.
Moreover, the agreement seems to bring a solution only to the Qana and Karish fields’ dispute, but does not provide clarity and procedures for other transboundary deposits along the agreed-upon maritime boundary (Line 23), which can be exploited from either side, leaving the resolution of any potential dispute on these in the hand of the US. A discussion facilitated by the latter is not a binding form of resolution, and procedures and time limits on each mode of resolution should have been put in place. This is accompanied by several ambiguous and shallowly explained articles, that would leave a wide room for breach and future disputes that might arise from both sides along Line 23.
On the transition between the land and the sea, the agreement leaves the resolution of the buoy line—around 5 kilometers from the coast—unilaterally established by Israel in 2000 as the status quo to a further agreement until both parties decide to delimitate their land boundary.
What does that mean for Lebanon?
Some could see the signature of this long-awaited agreement as a triumph for Lebanon at a very delicate political and geopolitical moment, but this should not allow at any point to announce that the country has become an oil or gas producing country, something that is yet to be proven. The agreement constitutes a step forward in the right direction, despite the ability of the country to have claimed a better deal over the past years.
In the short term, the agreement removes all the political and/or geopolitical arguments that international oil companies used to postpone drilling activities in the two offshore blocks licensed in 2018. Initially, these blocks were licensed to a consortium formed by French giant TotalEnergies (40 percent), Italian ENI (40 percent), and Russian Novatek (20 percent). Yet, some changes took place with Novatek withdrawing from the consortium and transferring their shares to the Lebanese state, which transferred them in turn to TotalEnergies, which currently holds 60 percent of total shares. This 20 percent is expected to be acquired soon by Qatar Energy prior to starting the drilling activities.
The consortium is expected to present a new drilling plan to the Lebanese Petroleum Administration and the ministry of energy and water, based on which a drilling ship should arrive at the identified spot by mid-2023. Following two to three months of drilling, and a couple of months of data analysis, it should be announced before the end of 2023 if Qana prospect holds a commercial discovery or not. In the case that result comes out positive, further exploration and development operations would be conducted; this is expected to last no less than three to four years, which means that Lebanon cannot expect first gas from Qana before four to five years at the earliest, assuming no external political or technical circumstances would delay that process.
Knowing the country’s dire economic and political situation, and having in mind the huge gap in the financial system estimated at around $70 billion, one cannot rely on the yet-to-be-discovered gas to stop the current economic collapse. Moreover, even in the best-case scenarios, estimated profits resulting from any potential discovery will not be able to fill this gap.
What should Lebanon do next?
The maritime agreement signed in October could constitute a good starting point considering the current geopolitical context under which it was held, the country’s economic and institutional collapse, and the fact that Lebanon’s consecutive faults—not to say sins—and complex internal politics could not have led to better outcomes.
Yet, Lebanon should manage expectations when it comes to its offshore gas wealth to avoid another disappointment similar to the 2013 experience which ended in 2020 when the first well drilled in block 4 came out dry. To the contrary, it should only focus on moving forward in the path of the much-needed reforms at all levels. The government and concerned ministries should continue working to build up institutional support for the oil and gas sector, and ensure transparency and accountability throughout the whole process, especially when it comes to information sharing and dissemination of companies’ findings to the public in any offshore block.
Additionally, negotiations with both Syria and Cyprus regarding the western and northern maritime boundaries respectively should be launched and agreements should be put in place, as this might affect the licensing of any future block as part of the second offshore licensing round. Preparations for the latter, opening all remaining eight blocks and extending until June 2023, will constitute a major test for the signed agreement, and will measure the international oil companies’ readiness and seriousness to invest and believe in the country again.
At the governance level, and since the signature of the agreement, internal discussions were re-initiated around the ratification of the sovereign wealth fund draft law, expected to protect the revenues resulting from the country’s oil and gas wealth and preserve it for the coming generations. If ratified, the law would constitute a step forward toward avoiding the fall of these revenues into the elites’ corrupt practices or at the service of the public debt settlement. Finally, it is important to highlight the much-needed work on the onshore exploration side, where activities are expected to be faster and less expensive in terms of investments, only if political consensus is met around this matter, and the updated onshore law is ratified at the Lebanese parliament.
Marc Ayoub is an Energy Policy researcher and a PhD Candidate at the University of Galway (UG) in Ireland.