---
title: "Drilling in Block 9 and the Expected Results | Ghazi Mahmoud"
url: https://ghazimahmoud.com/en/articles/2023-09-07-5ed022/
lang: en
description: "The arrival of the Transocean Barents drilling rig in Block 9 this past August 15 revived Lebanese hopes that uncertainty would soon give way to certainty regarding the availability of oil and gas beneath the waters of Lebanon's exclusive economic zone."
---

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# Drilling in Block 9 and the Expected Results

[Brig. Gen. (Ret.) Dr. Ghazi Mahmoud](https://ghazimahmoud.com/en/about/)

7 Sep 2023 · 8 min read

[Energy, oil and gas](https://ghazimahmoud.com/en/articles/energy/)

The arrival of the Transocean Barents drilling rig in Block 9 this past August 15 revived Lebanese hopes that uncertainty would soon give way to certainty regarding the availability of oil and gas beneath the waters of Lebanon's exclusive economic zone. This is especially true given that the timeframe for completing the drilling of the exploratory well, as announced by the operating company, is less than seventy days, meaning that the preliminary result of the drilling is bound to emerge once drilling operations conclude and reach the specified depth, and perhaps even during those operations. What bolsters Lebanon's chances of finding gas and oil beneath its seabed in general, and in the area currently targeted for drilling in particular, is the short distance, not exceeding 7 kilometers, between the well where drilling has begun and the Karish field, whose reserves range between 1.3 and 2 trillion cubic feet of natural gas and from which Israel began production in October 2022. This allowed the Hebrew state to transition from an oil-importing country to an exporting one after the operating company, Energean, extracted the first shipment of oil from it in February 2023. Here it is necessary to pause and examine the geological data that have provided positive indicators of promising hydrocarbon reserves for Lebanon, particularly what the US Geological Survey first announced in 2010 and reaffirmed in 2021 regarding the potential presence of promising quantities of oil and gas reserves in the eastern Mediterranean basin, averaging 2.55 billion barrels of crude oil. As for gas reserves, they average 316.2 trillion cubic feet, after its 2010 estimates had been limited to gas reserves averaging 175.2 trillion cubic feet. From the 1940s until the end of the 1960s, Lebanon made numerous attempts to explore for oil, drilling several exploratory wells across various onshore areas of Lebanon without achieving tangible results at the time. Lebanon's attempts to explore its hydrocarbon resources resumed in 1993 with seismic surveys conducted by the French company Geco-Prakla, continuing up to 2014, when Neos GeoSolutions carried out airborne geological surveys covering onshore Lebanon, yielding encouraging results as evidenced by the keenness of international companies to qualify to exploit the reserves indicated by these surveys. The similarity in the geological formation of the eastern basin, in terms of the presence of geological structures consisting of folds, porous rocks and cap rocks suitable for generating and accumulating hydrocarbon resources of oil and natural gas, has been confirmed by the similarity between the results of geological studies and seismic surveys of Lebanon's mainland and exclusive economic zone and the findings announced by the US Geological Survey. While awaiting discoveries to materialize in Lebanon, regional discoveries and the start of production from discovered fields have dispelled doubt with certainty. As for Lebanon's expected reserves, Spectrum, the Norwegian company based in Britain that conducted three-dimensional seismic surveys off Lebanon's southern coast in 2012, estimated the volume of natural gas reserves available there at around 25 trillion cubic feet (Tcf) and considered the reserves available in that area to be among the richest and best reserves in the eastern Mediterranean basin. In 2013, the French company Beicip-Franlab, an affiliate of the French Institute of Petroleum and New Energies, published a report estimating that Lebanon holds oil reserves ranging between 440 million and 675 million barrels, with an average equivalent to 557.5 million barrels, in the northern area near the borders with Syria and Cyprus, while estimating its natural gas reserves at 15 trillion cubic feet, bearing in mind that the seismic survey covered only 80% of the total area of the exclusive economic zone, which amounts to 22,000 square kilometers. It is worth noting that the negative result of exploration in Block 4, as announced by TotalEnergies after completing the drilling of the exploratory well, does not rule out the possibility of reserves existing in that block, especially since exploration was limited to drilling a single well. Indeed, the probability of achieving positive results from drilling a first well is low, and when an exploratory well yields positive results, exploration companies drill no fewer than three to five wells to delineate and appraise the size of the reserves in the targeted area. Exploratory drilling in Block 9 faces three possibilities, ranging from finding commercial reserves that allow part to be exported while meeting domestic market needs with the other part, to discovering modest quantities that do not cover the costs of developing the field and extracting from it, while the final possibility is that the field proves dry. Whatever the result of drilling the first well, it does not exempt the operating company from drilling other wells in Block 9 to reach the reservoir where oil and gas resources accumulate. Regardless of the size of the hydrocarbon reserves available beneath the seabed of the exclusive economic zone, a period of no less than three years, and which should not exceed six years, is required to reach the stage of exploiting these resources, after which Lebanon can begin receiving financial returns. This is due to the time required for exploratory drilling, as well as the work of developing the well or wells so that they are ready to begin production, which depends on oil and gas price levels in global markets. Exploration carried out by the countries bordering the eastern Mediterranean basin has indicated the availability of mostly commercial reserves, making it useful to shed light on the revenues expected from oil and gas extraction, especially since state returns from oil and gas extraction are not limited to its share of profit petroleum, but also include fees, taxes on the profits of operating companies, and other levies on activities related to exploiting hydrocarbon wealth. Once production begins, financial revenues are distributed across three main sources. The first source, called royalties or ownership rights, is payable by the right holder on all quantities extracted from producing reservoirs in offshore waters and those under development. Royalties are collected based on oil and gas prices on the date of extraction, and the state has the option of collecting these royalties in cash or in kind in accordance with the proportions between the extracted quantities of oil and gas. Article 22 of Decree 43 of 2013 set the royalty rate payable on gas at 4%, while setting it on oil at a rate ranging from 5% to 12% depending on the average daily production volume during the month, such that the royalty rate rises only on the incremental quantity. Notably, many producing countries impose a higher royalty rate reaching up to 25% and apply the same rate to both oil and gas. A royalty serves as a rental fee for the area from which extraction takes place and is considered part of production expenses deducted from the gross income of the operating company. Alongside the royalties collected by the state from operating companies, companies holding petroleum rights and operating companies are required to pay a tax on the profits they realize during the exploitation of oil and gas, set at a rate of 20% of the taxable result, in accordance with Article 7 of Law No. 57 of 2017. Operating petroleum companies are thus placed on an equal footing with other commercial companies, and state revenues are bolstered from new productive sources. As for the most important source of state revenues from oil and gas extraction, it is profit petroleum, meaning the remaining quantities of oil and gas extracted from reservoirs after deducting cost quantities, that is, the production cost required to carry out various petroleum activities. The state's minimum share of profit petroleum must not be less than 30%, as stipulated in Article 24 of Decree 43 of 2013 concerning the distribution of profit petroleum shares between right-holding companies and the state, while Paragraph 3 of Article 23 of Decree 43/2017 set the maximum limit for cost recovery at 65% of available petroleum. Projected oil and gas revenues, whatever they are called and whatever their rates may be, depend on the size of the reserves expected to be discovered in terms of whether or not they are commercial, and they depend to the very same extent on price levels on the date of production. The availability of commercial quantities is a prerequisite for moving from exploratory drilling to developing wells and starting production, whereas price levels constitute the primary incentive attracting international companies to explore for and invest in hydrocarbon resources. As for oil and gas prices, they have maintained acceptable levels after reaching nearly $140 per barrel in the wake of the war between Russia and Ukraine, and they are expected to remain high thanks to the policies of producing countries that reduced their output, the first cut having taken place in November 2022 and the second last May, continuing until the end of 2023. As for the possibility of discovering commercial reserves in Block 9, suffice it to point out that the reserves of the Karish field, which do not exceed 2 trillion cubic feet of gas, were sufficient to develop it and produce from it all the way to export. This means that optimism regarding Lebanon's discovery of commercial oil and gas reserves rests on scientific data and the practical experiences of neighboring countries, and the same applies to the financial revenues expected from these discoveries. Yet the most important challenge lies in the sound governance of these revenues, not merely in their size, especially since the Lebanese have bitter experience with those in charge of public affairs casually squandering the country's financial resources, not to say stealing them, while political bickering has all but become a distraction for the people as certain influential figures plunder the nation's wealth and wreak corruption within it, having already relinquished the area stretching between Line 23 and Line 29 and the oil reserves it holds.

Translated from Arabic with AI. [Read it in Arabic](https://ghazimahmoud.com/articles/2023-09-07-5ed022/)

## Published in

- [Channel 23](https://ch23.com/Article/98518/الحفر-في-الرقعة-رقم-9-والنتائج-المتوقعة)
- [Lebanon Files](https://archive.lebanonfiles.com/2023/articles/باقلامهم/الحفر-في-الرقعة-رقم-9-والنتائج-المتوقعة/)
- [OZ Arab Media](https://ozarab.media/الحفر-في-الرقعة-رقم-9-والنتائج-المتوقعة/)

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