In Lebanon, officials talk of a bright future funded by offshore oil and gas reserves

from The Washington Post..

By Caroline Anning

June 2, 2013

In BEIRUT — Encouraged by successful gas exploration in neighboring Israel and Cyprus, Lebanon is seeking to transform its debt-ridden economy and creaking infrastructure by tapping into its own offshore oil and natural gas reserves.

The country’s energy minister, Gebran Bassil, last month opened the first round of bidding for contracts to explore the reserves. To a hopeful public, he spoke of potential revenue “in the billions” and, in an emotional video, envisioned a gleaming metro running through Beirut, a round-the-clock electricity supply and free education for all.

It is an appealing vision for a country that has no public transportation to speak of and daily rolling power cuts of up to 20 hours due to chronic infrastructure problems. The situation is so bad that in 2012, the World Economic Forum ranked Lebanon last out of 144 countries in quality of energy supply.

But analysts caution against being too optimistic.

“There are many factors that do not inspire confidence,” said Alia Moubayed, senior Middle East economist at Barclays Capital in London.

Lebanon’s dysfunctional political system, sharply divided along sectarian lines; an increasing absence of state authority; and poor coordination among government ministries could make it difficult to carry out such an ambitious plan, she said. There’s also a risk that politicians will misuse or misappropriate revenue generated by the energy resources.

Competing claims by Israel and Lebanon to about 215,000 acres of potentially mineral-rich maritime territory and increasing instability caused by the Syrian civil war could also complicate the effort.

Lebanon began to tap its onshore oil resources in the 1960s, but the long civil war stopped all development. While the government has known about the resources lying off the Mediterranean coast for decades, the focus did not shift there until 2000. Political infighting, a major war with Israel and long stretches without a government have hampered decision-making since then.

Officials swung into action only recently, after Israel and Cyprus began developing their natural gas reserves in earnest. The Petroleum Administration, responsible for negotiating oil and gas contracts, was supposed to be appointed early last year, but squabbling over representation for the country’s different religious sects delayed the process by months. Ultimately, the six seats were given to men from each of Lebanon’s six largest religious groups.

Lebanese officials hope to begin production in 2016, but that timeline leaves them lagging behind Cyprus and Israel, which share the Levant Basin with Lebanon. Cyprus recently signed deals for offshore drilling, and in March, Israel started pumping gas from its new $3 billion Tamar field. Israel, which is still officially at war with Lebanon, is also developing its huge Leviathan gas field, which has the potential to make the country a net energy exporter.

Most Lebanese are cautiously optimistic about their oil and gas prospects. But many are doubtful that Bassil — who has yet to improve the electricity situation — can deliver on his grandiose promises.


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