Why Lebanon produces no oil, analysis


Lebanon oill , gas reserves
Lebanon oill , gas reserves
The Economist explains

LAST week the Lebanese government announced the final list of companies eligible to bid for its first-ever round of licensing for oil and gas exploration and production, which is due to start in September. Saddled with debt greater than 140% of GDP, Lebanon could do with the revenue it would receive from exploiting its offshore hydrocarbon reserves, estimated at 850m barrels of oil and 96trn cubic feet of gas. Yet it lags behind neighbouring Israel, Cyprus and Egypt in tapping the deposits. While the existence of large fields in the eastern Mediterranean has been known since 2009, Beirut has yet to start drilling for the black stuff. Why is Lebanon taking so long to join the ranks of oil-producing nations?

Much of the blame can be attributed to politics. In order to get the licensing process started, the government needed to approve two decrees: the first dividing Lebanon’s exclusive economic zone into ten blocs and setting their co-ordinates; the second specifying tender protocols and establishing how the oil produced would be shared between companies and the government. Yet political paralysis and sporadic violence have held up decision-making since the assassination in 2005 of Rafik Hariri, a former prime minister. Sunni, Shia and Christian factions have been jostling for influence in the government and parliament, where seats are distributed along confessional lines. Sectarian rivalries have grown even sharper since the outbreak of Syria’s civil war, with competing power centres supporting opposite sides in the conflict and disagreeing over how to manage an influx of more than 1m refugees. The political standoff resulted in a 29-month vacancy at the presidency, starting in May 2014, which delayed key decisions. No oil-and-gas auction happened after Lebanon first pre-qualified 46 companies in 2013.

The election of Michel Aoun as head of state in October has eased this stalemate. The decrees were passed in January, and a second pre-qualification round was launched shortly thereafter. But the process has not been helped by uncertainty surrounding the viability of the licences Lebanon is putting up for sale. Some of the southern-most blocs being auctioned overlap with maritime territory also claimed by Israel. Lebanon’s inclusion of a contested 860-sq-km zone in its tender disrupted what Israel says was a status quo in which neither side does anything with the disputed area. Israel responded by proposing a maritime law formalising its rights on the stretch of seabed, which Nabih Berri, the Speaker of Lebanon’s parliament, described as “a declaration of war on Lebanon”. At a time when tensions are flaring up between Israel and Hezbollah, a Lebanese militant group, investors will probably wait for the row to be solved before investing millions of dollars in exploring the contentious blocs.

Precedents are not encouraging. America has been trying for several years to broker a resolution between the two countries, which have no diplomatic relations. Calls by Lebanese authorities for the matter to be settled by the UN’s mission in southern Lebanon have so far gone unheeded. Even if these disputes are resolved, other problems persist. Should Lebanon’s reserves prove as substantial as predicted, it may have difficulties finding regional customers: the Egyptian, Israeli and Turkish governments are close to signing supply deals with each other.

The Economist



8 responses to “Why Lebanon produces no oil, analysis”

  1. Danny Farah Avatar
    Danny Farah

    It’s the same way why Lebanon do not have electricity for hundreds of years. Trash piling up while the ministers are bickering and fighting and pretending to fight for Lebanon and not who is going to get the bigger cut of the oil revenues. I am sure Berri is sharpening his teeth and Nassrallah will use him to get a nice chunk to make sure his thugs are provided for. While Aoun will be the third on the list, geagea and Jumblet and the rest will get scrapes of whatever left. therefore if we can get election going ever then they may agree on a resolution to start producing oil. Then you have greedy Israel will be waiting in the wings to make sure it gets the bigger pie and God knows what Nassrallah and Iran will do then. Even after the war no one had learned the hard lessons and yet we may never learn anything as it seems as of now.

    1. Barry Avatar

      I knew the Jews were to blame!
      PS- Keep up this attitude, It has been working for the Arab world for decades, which is why it is so advanced and killing it in hi tech, energy production, satellites, drones, water desalinization, military prowess, tourism, real estate boom, diplomatic advances, improved health care and quality of life, high net immigration, solid economy, low crime…oh wait, that’s Israel. Sorry.
      But keep up the good work!

  2. Niemals Avatar

    Isn’t Nabih Berri, aware that there can’t be “a declaration of war on Lebanon”, when there is no peace between Lebanon and Israel?

    It is as if he needs the help of Nassrallah to get the bigger cut of the oil revenues.

    In the meantime neighbouring Israel, Cyprus and Egypt are tapping the deposits.
    Furthermore Egyptian, Israeli and Turkish governments are close to signing supply deals with each other.

    Israel is enjoying the political paralysis in Lebanon and will be waiting in the wings to make sure it gets the bigger pie.

    1. Danny Farah Avatar
      Danny Farah

      Make no mistakes once Assad has more control of Syria and Daesh is limited, then Iran and Hezbollah will play the card that Israel is cutting in on our area and there will be another war to justify it.

      1. Niemals Avatar

        Unpleasant prospects for the region!

  3. master09 Avatar

    Or anything else but ??

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