Energy

Will Lebanon Become An Oil/Gas Country ?

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<p>Before answering this question, let's knock on the country's modern history door.</p><p>A positive news was announced a few days back about reaching an agreement regarding Lebanon's maritime western border dispute.</p><p>The news boosted a rosy hope and elevated the morale of the people to become an oil-producing country after it suffered from an unaccountable crisis during the previous decades. This started from the civil war of 1975-1980, followed by multiple Israeli invasions, where the whole infrastructure was destroyed several times.</p><h2><span style="font-size: 14pt;">History of Lebanon</span></h2><p>Luckily, during the eighties of the last century, Mr. Rafic Hariri became the country's Prime Minister and started the rebuilding process of the infrastructure with all the other utilities.</p><p>He brought Lebanon back on its feet with the help of the Arabic and international countries, by signing the Taiif agreement in Saudi Arabia, which ended the war. And later, through Paris I and Paris II conferences.</p><p>Lebanon once again became the preferred destination for the MENA countries. Unfortunately, this period did not last long. Mr. Hariri was assassinated in Beirut (2005) by a car bomb.</p><p><strong>Economic Crisis</strong></p><p>The country once again went into turmoil. The political dispute among the different sects reached a dangerous level when the Parliament failed to elect a new president for more than two years, which delayed the government formation for an additional year.</p><p>Before the end of this year the Syrian army withdrew back to Syria ending its thirty years presence in Lebanon.</p><p>When Mr. Saad Hariri (Mr. Rafic's son) was named as Prime Minister, the situation did not change much, mainly due to the presence of illegal arms with some religious and political parties.<br />&nbsp;<br />The Syrian war in 2011, added another burden to the weak economy, when more than two million refugees fled their country, crossing the border to Lebanon. This number is considered to be the highest in the world compared to the local population of four million. This presence put an extra pressure on the utility services, which were already suffering.<br />&nbsp;<br />After these setbacks, the country was hit by three disastrous consecutive crises in a few months. The Seaport blast in Beirut, the second blast after Hiroshima, killed and injured thousands of civilians and destroyed a considerable part of the capital. After that, the coronavirus pandemic, and the local economic collapse, added to the crises.<br />&nbsp;<br />Historically, Lebanon used to be the preferred destination in the region for its excellent performance in different sectors, such as:</p><ul><li style="list-style-type: none;"><ul><li>Medicine - elite doctors and first-class hospitals</li><li>Education - excellent programs and professors</li><li>Financial Institutions - banks were the target of the Arab depositors for their respected secrecy and high returns</li><li>Tourism - with diverse and open societies, in addition to numerous attractive destinations, on the sunny cost as well as on the nearby icy mountains which are located within a 40-minute trip ride</li></ul></li></ul><p>In fact, the above prosperity disappeared in a matter of few months starting from 2020. The country defaulted on its payments to international lenders, banks stopped providing cash, people lost their savings, and the local currency "Lira," lost its value (The U.S. Dollar jumped from 1500 Liras to 40,000 Liras as per today's exchange rate).</p><p>These problems made the local salaries worthless and the prices of the commodities skyrocketed. The war in Ukraine worsened things even more.</p><p>With all the above, plus the political unrest, the presence of illegal arms, and the widespread corruption in government, ministries, municipalities, etc. The country ended up with problems almost impossible to be solved locally and made it hard to survive without regional and international assistance.</p><p><strong>Impact of Economic Crisis</strong></p><p>All the above have caused Lebanon to lose its biggest advantage, which is its "human capital", the qualified human wealth.</p><p>Due to the economic crisis, the youth, doctors, professors, engineers, and highly skilled individuals were forced to migrate, seeking a better life abroad. They wished to enjoy the basic human needs, which they missed at home, like electricity, water, Medicine, and above that to support their families who remained behind.</p><h2><span style="font-size: 14pt;">Oil and Gas Industry in Lebanon</span></h2><p>Are the newly discovered oil and gas reserves a gift or a curse?<br />&nbsp;<br />The answer is a bit complicated.</p><p>The country managed to elect a new president free from internal pressure and establish an effective and transparent government soon after the presidential election, for two reasons:</p><ul><li style="list-style-type: none;"><ul><li>To set up a regulatory board for managing the oil and gas sector, where the "U.S. Geological Survey" estimated a mean of 1.7 billion barrels of recoverable oil and a mean of 122 trillion cubic feet of recoverable gas in the Levant Basin Province. Lebanon's share is more than 25% from this,</li><li>Also, to stop the corruption with the needed reforms. This agreement would be a valuable gift.&nbsp;</li></ul></li></ul><p>Otherwise, the statistic will remain unchanged, the political dispute will escalate, and corruption will find ways to be the norm again.</p><p>Then this treasure will be a curse to the Lebanese people, and the mafia who controls the political arena will benefit, and multiply its gains at the expense and prosperity of the Lebanese people.</p><p>&nbsp;</p><p><span style="font-size: 10pt;"><em>This article was contributed by our expert <a href="https://www.linkedin.com/in/rashadsablouh/">Rachad Sablouh</a></em></span></p><p>&nbsp;</p><h3><span style="font-size: 18pt;">Frequently Asked Questions Answered by Rachad Sablouh &nbsp;</span></h3><h2><span style="font-size: 12pt;">1. How many gas reserves does Lebanon have?</span></h2><p>There is no confirmed quantity yet, but the estimated are between 340 and 708 billion m3 (Sia Partners, 2019) and (Bou-Hamdan, 2020).</p><p>According to estimates provided in September 2014 by the Lebanese Petroleum Administration at a conference of the Research and Strategic Studies Center of the Lebanese Armed Forces, with respective expectations of 422, P50, 368, P50, and 430, P50, billion m3 (Arbid, 2014).</p><p>The estimation for Oil according to Lebanon's government is 865 million barrels. &nbsp;</p><h2><span style="font-size: 12pt;">2. How much oil and natural gas does Lebanon produce?</span></h2><p>Zero</p><h2><span style="font-size: 12pt;">3. How does the government regulate the oil and gas industry?</span></h2><p>The oil and gas industry are regulated through the Lebanese Petroleum Administration, which needs reorganizing, and new appointments and recruitments.</p><h2><span style="font-size: 12pt;">4. How has the war in Ukraine impacted the oil and gas industry?</span></h2><p>It has impacted the country's economic situation, as it did worldwide, not the Oil and Gas industry that does not exist yet.</p><p>&nbsp;</p>
KR Expert - Rashad Sablouh