Where once a country might have wanted to strike gold, now hitting upon a hydrocarbon find feels like a prize. But finding a hydrocarbon is only the beginning of the process and might not be worth it — as Lebanon is discovering.
First, a little background: for some time, Lebanon has been experiencing an energy crisis. Without resources of their own, the industry (which is government-owned) is reliant on foreign imports, which are expensive. Electricity in early 2020 was responsible for almost 50% of Lebanon's national debt. Major blackouts were common.
This contributed to a spiralling financial crisis, prompting public protests and riots as the middle class disappeared and even wealthier citizens struggled. Before Covid-19 and the devastating August 2020 blast in Beirut, Lebanon was in crisis.
The idea that the country might be able to switch from foreign oil to local gas was understandably appealing, especially when a major find was literally right there on the Lebanese shore. In 2019, a consortium of Israeli and US firms discovered more than 8tcm of natural gas in several offshore fields in the Eastern Mediterranean, much of it in Lebanese waters.
A hydrocarbon find off the Beirut coast has failed to live up to its early promise.
But a find is only the beginning. With trust in Lebanese politicians low (the country ranks highly in most government corruption indexes) and a system that has repeatedly struggled to deliver a stable government, there are additional difficulties, not least a delay in the licensing rounds and a lack of trust — both internally, from citizens, and externally, from potential bidders. Meanwhile, Lebanon's neighbours race ahead to exploit their own finds, which ratchets up tensions.
Amid all that, a drilling exploration managed to go ahead last summer. But the joint venture between Total, ENI, and Novatek, which operated a well 30km offshore Beirut and drilled to approximately 1,500 metres, did not bring back the hoped-for results. The results confirmed the presence of a hydrocarbon system generally but did not encounter any reservoirs of the Tamar formation, which was the target.
Offshore exploration is a long process, with a lot of challenges and uncertainties and Ricardo Darré, Managing Director of Total E&P Liban, said afterwards, "Despite the negative result, this well has provided valuable data and learnings that will be integrated into our evaluation of the area". But the faith national politicians have long put in the hydrocarbon find, selling it as an answer to all Lebanon's problems, seems to have only worsened the domestic situation since.
And domestic politics is just the start of the problems…
Unlike other countries in the Middle East, Lebanon has no pipeline infrastructure of its own.
Israel, Egypt, and Jordan already have pipelines, which go to Italy. Turkey is working with Libya on a pipeline. Lebanon has no pipeline infrastructure of its own yet, although Russia has storage facilities and pipelines in the country and an eye on possible competition in the gas market.
None of that is an issue if the supply is intended for domestic use but that might not be profitable enough for investors and the Lebanese government would struggle to underwrite production on its own. Cyprus has encountered similar issues exploiting its share of the find.
Lebanon has also set an ambitious goal of having 30% of domestic energy mix sourced from renewable energy by 2030. The hoped-for gas was intended to support the renewable energy mix but, with the clock ticking, it might be that priorities shift to focusing on renewables. The Covid-19 pandemic will significantly impact the budgets of drilling companies and the push for renewable energy, both from governments and investors, seems to be growing as a way to boost economic recovery.
It may be that, after all the excitement around the hydrocarbon find, Lebanon starts to look elsewhere for its energy provision.
Scientists have discovered new microbes in the deep-sea which can use greenhouse gases, such as methane and butane, as energy sources. These new microbes could help reduce the concentration of these gases in our atmosphere and have the potential to be used to clean up oil spills in the future.
The deep-sea is one of the Earth’s most unexplored areas. Researchers from the University of Texas at Austin’s Marine Science Institute have published findings from an extensive documentation of microbial communities living in the hot, deep-sea sediments of the Guaymas Basin in the Gulf of California, US.
They found new microbes, vastly different genetically from any found before, that possess the same ability to ‘eat’ pollutant-chemicals as previously identified microbes.
A view of the 2010 Gulf of Mexico oil spill from the International Space Station. Image: Wikimedia Commons
The scientists analysed sediment from 2000m below the surface for genomic data. At this depth, volcanic activity causes high temperatures – around 200°C – and the water contains many hydrocarbons such as methane and butane, which can be used as energy sources for bacteria.
Patagonia, Argentina, is the site of Vaca Muerta, a geological formation known for its oil and gas reserves. Image: Gervacio Rosales
Since taking office in late 2015, Argentinean president Mauricio Macri has prioritised investment in the energy sector to help reverse a costly energy deficit. Argentina’s abundant shale resources have attracted a growing number of major international companies, and attention has mostly been focused on the Vaca Muerta shale fields. Located in Patagonia they are one of the world’s largest reserves of shale gas.
The proposed investments revealed in YPF’s strategic plan for 2018-2022 indicate that the company intends to contribute $21.5bn directly, with the remainder coming from partnerships and associated companies.
Mauricio Macri has focused on increasing investment into Argentinian energy during his tenure as President. Image: Marcos Corrêa/PR
YPF intends to ramp up oil production and continue the development of Argentina’s huge shale resources. The company said its non-conventional production is expected to grow by 150% over the period 2018-2022, with half of its hydrocarbon production coming from shale and tight oil and gas by 2022. The lifting of shale gas output will be helped by the continued fall in development costs.
Shale gas growth will increase the availability of natural gas liquids (NGLs) for chemical production. YPF estimates that the growth in shale gas will result in a 45% increase in its supply of NGLs between 2017 and 2022. YPF indicated that it has identified opportunities to invest in petrochemicals in Argentina, Brazil, Peru, Bolivia and Paraguay.
Shale oil and gas is accessed though hydraulic fracturing or ‘fracking’. Image:
These investments would take advantage of the regional market imbalance together with shale gas growth, it said in its strategic plan, presented to investors in October 2017. ‘The region is a net petrochemical importer with room for a world scale complex,’ it added.
There is room for one or two more ethylene sites, one or two methanol sites and two or three urea sites in the region, according to YPF.
The company said it is also developing opportunities to stimulate demand for natural gas, because demand in Argentina is highly seasonal. Opportunities include power generation, exports to Chile, Uruguay and Brazil, as well as petrochemical investments.
YPF is Argentina’s largest petrochemicals producer, with a capacity of 2.2m t/year. It has three plants, located in Ensenada, Plaza Huincul and Bahía Blanca. Output includes benzene, toluene, mixed-xylene, ortho-xylene, cyclohexane, solvents, methyl tert-butyl ether (MTBE), 1-butene, oxo alcohols, tert-amyl methyl ether (TAME), linear alkylbenzene (LAB), linear alkylbenzene sulfonate (LAS), polyisobutylene, maleic anhydride, methanol and urea. The Bahía Blanca site is operated by nitrogen fertiliser producer Profertil, a 50:50 joint venture with Canadian company Agrium.
Argentina’s potential for new petrochemicals investments was highlighted recently by Marcos Sabelli, president of the Latin American Petrochemical and Chemical Association (APLA).
Speaking at the Latin American Energy Organization’s Forum on Regional Energy Integration in Buenos Aires, he said development of the Vaca Muerta shale fields improves the potential for steady feedstock supplies.
‘We are proposing that we replicate the US model,’ he said. The US shale boom enabled the US to move from an importer to an exporter of petrochemicals. ‘Argentina has this potential. There is feedstock, market and companies,’ he added.
YPF said it is the largest shale operator outside North America, with a daily production exceeding 67,400 barrels of oil equivalent. The company participates in 50% of Argentina’s Vaca Muerta shale gas and oil reserves area, with more than 550 producing wells; 168 are horizontal.
The Green River Formation, Colorado, US, is one of the richest oil deposits in the world. Image: National Park Service
Conventional hydrocarbons will remain the basis of the company’s production, with the development of more than 29 projects and the drilling of more than 1600 wells, it said. YPF has three refineries, accounting for 50% of Argentina´s capacity.
The company expects its production of oil and gas to grow by 5%/year over the next five years, reaching 700,000 barrels of oil equivalent per day in 2022. Exploration efforts will continue, with reserves targeted to rise by 50%. YPF also intends to boost its electricity production, much of it through renewables, as part of efforts to become a fully integrated energy company. YPF is pledging the investments at a time when President Macri’s pro-market government is on a drive to attract investments to consolidate an economic rebound after six years of stagnation.
YPF are hoping to up its production of oil and gas as energy resources by 5% a year by 2022. Image: Pixabay
Argentina’s GDP is forecast to grow by 2.9% in 2017 and 3.2% in 2018, according to the Organisation for Economic Co-operation and Development (OECD). The country’s shale gas boom, combined with economic growth, could make it an attractive candidate for a major new petrochemicals project.
The US’ environment agency and Clean Water Act is in trouble. Image: Public Domain Pictures
Budget proposals will slash the US Environmental Protection Agency’s funding by almost a third, and its workforce by 20%, quite apart from a major refocusing of its agenda. The new EPA administrator Scott Pruitt – whose time as attorney general in Oklahoma was notable for its opposition to environmental measures and the filing of multiple lawsuits against EPA – has certainly hit the ground running.
In contrast to Trump, Pruitt is actually getting stuff done, often going over the heads of his own staff. Planned regulations such as the chemical accident safety rule and a rule covering methane leaks from oil and gas wells have been delayed. Others have been reversed, including a ban on the neurotoxic pesticide chlorpyrifos, flying in the face of scientific advice from his own agency.
Trump faced harsh criticism from several nations after pulling out of the Paris Agreement. Image: Gage Skidmore@Flickr
Other moves come in response to executive orders from the president. Trump’s earlier criticism of Obama’s use of executive orders hasn’t stopped him from throwing them around like confetti – in his first 100 days, he signed almost as many as Obama averaged in a year.
For example, at the end of February, he signed one requiring a review of the Waters of the United States (WOTUS) rule, which defines what constitutes navigable waters. This might sound obscure, but it led to the EPA announcing at the end of June that it will rescind the 2015 Clean Water Rule.
‘WOTUS provided clarity on what bodies of water are subject to protections under the Clean Water Act,’ said Massachusetts congressman Mike Capuano. Essentially, the 2015 definition extended its scope to bring small waterways such as wetlands and streams under federal environmental rules, and not just big rivers and lakes.
‘The federal government won’t have the authority to regulate pollution in certain waterways because they don’t qualify under the EPA’s new definition,’ Capuano continued. ‘This will surely impact drinking water in many communities all across the country, since 117m Americans currently get their drinking water from small streams.’
EPA even published a press release that featured multiple quotes from Republican governors, senators and representatives across the country supporting the move. Quotes from those like Capuano – who believe it is a step backwards in water safety – were notable by their absence.
Seven US scientific societies wrote to Trump condemning his actions. Image: Max Pixel
So is mention of any scientific rationale. A letter from US scientists, drafted by conservation group American Rivers, states that the Clean Water Rule was developed using the best available, peer-reviewed science to clarify which bodies of water are, and are not, protected under the act. Importantly, it says that tributaries, intermittent streams and waters adjacent to them such as wetlands, are protected because of their physical, chemical and biological connections to navigable waterways. ‘We are disappointed that the current Administration has proposed dismantling the Rule with minimal consultation and without scientific justification,’ it says.
Much has been made of Trump’s withdrawal from the Paris Climate Agreement, but that’s not the only signal that the air in the US is set to get dirtier. An executive order on energy independence signed by Trump at the end of March 2017 led to an instant response from EPA that it would review the Clean Power Plan. The order asked the various agencies to submit plans to revise or rescind regulatory barriers that impede progress towards energy independence, as well as wiping out several of Obama’s executive orders and policies in the field of climate change.
Experts are worried that US air and water will become dirtier. The country is already the second biggest contributor to climate change in the world. Image: Pixabay
Top of the list for a potential resurgence: dirty energy. EPA has been directed to review, revise and rescind regulations that ‘may place unnecessary, costly burdens on coal-fired electric utilities, coal miners, and oil and gas producers’.
‘Our EPA puts America first,’ claimed Pruitt. ‘President Trump has a clear vision to create jobs, and his vision is completely compatible with a clean and healthy environment. By taking these actions today, the EPA is returning the agency to its core mission of protecting public health, while also being pro-energy independence.’
Many others beg to differ, including New Jersey senator Cory Booker. ‘It’s simply shameful that President Trump continues to put the interests of corporate polluters ahead of the health and safety of New Jersey families,’ he said. ‘The Administration’s repeated denial of clear science and proposed gutting of the EPA jeopardises the welfare of all Americans.
‘Under no circumstance should we allow the fundamental right of each and every American to live in a safe and healthy environment be undermined by such destructive and irresponsible policies.’