Lebanon is still mired in a chronic economic collapse, far from extracting oil and gas resources, if any, even if an agreement was reached on the demarcation of the maritime border with Israel, according to experts.
After a positive atmosphere prevailed regarding the approaching announcement of an agreement, Israel announced (Thursday) its rejection of Beirut’s comments on an American offer to demarcate the borders.
In a country where corruption is rampant in its institutions, and its officials are accused of looting public money, many wonder whether the extraction of these resources will bring the state profits that help its economy to rise.
non-oil country
Marc Ayoub, a researcher at the Issam Fares Institute at the American University of Beirut, told AFP: “Reaching an agreement would be a step forward, but it does not mean that Lebanon has become a gas or oil producing country.” He explains: “We are talking regarding a time frame of five to six years before the first (extraction) gas,” in case valid commercial reservoirs are found, describing the time estimate as “optimistic.”
With the global demand for gas rising, in light of the energy crisis sparked by the Russian war in Ukraine, Lebanon hopes that any marine discovery will contribute to alleviating the severity of the economic collapse. However, more than a decade following declaring its maritime borders and its exclusive economic zone, Lebanon today has no evidence of proven reserves of natural gas.
There are no commercial reservoirs
An exploration operation conducted by a consortium of French Total, Italy’s Eni and Russia’s Novatek in 2020, found only traces of gas in one of the wells, without finding commercial reservoirs.
The maritime border dispute between Lebanon and Israel, which are in a state of war, precludes the commencement of drilling in one of the offshore areas.
After two years of American mediation, Lebanon sent (Tuesday) to the American mediator, Amos Hochstein, his notes on his latest offer.
However, the positive Lebanese atmosphere regarding reaching an agreement soon, was not reciprocated by Israel.
An Israeli official said (Thursday) to Agence France-Presse: “Prime Minister Yair Lapid was briefed on the details of the fundamental changes that Lebanon seeks to make, and instructed the negotiating team to reject them.” Ayoub explains that the agreement – if it happens – “allows the continuation of offshore drilling activities, but it does not mean that Lebanon has become rich…or that its crisis has been resolved.”
start extraction
A seismic survey conducted by the British company “Spectrum” for a limited offshore area in 2012 estimated Lebanon’s recoverable gas reserves at 25.4 trillion cubic feet. The Lebanese authorities, in turn, announced higher estimates.
Block No. (9), where the “Qana” field is located, will be located in a key area for exploration by “Total” and “Eni”, which obtained in 2018 with a Russian company contracts for oil and gas exploration, before the latter withdrew this year.
After Israel announced that part of the “Qana” field is located in its territorial waters, Lebanese officials confirmed in recent days that the agreement being negotiated would guarantee Lebanon the entire field.
Ayoub explains that “if an agreement is reached, then by this time next year, we should have known whether there was a commercial discovery in (Qana) or not.” “If we have a discovery, it will take following that…no less than three to five years” before production begins, he adds. This time estimate, according to Ayoub, assumes the absence of any obstruction or delay on the part of the Lebanese authorities, which are widely accused of corruption and failure to manage the country’s successive crises, leading to the economic collapse that the World Bank has ranked among the worst in the world since 1850. Managing the Petroleum Sector At the end of 2012, it took several months to nominate the members of its board of directors, due to political disagreements over the nomination of members.
Rounds of granting licenses for oil and gas exploration have been repeatedly delayed since their launch in 2013.
Lebanon appears to be lagging behind the efforts of Israel, which has been investing for years in the Karish field, and expects to start extracting gas within weeks. Cyprus and Egypt have also begun to explore major fields.
«risk»
If commercial reservoirs are found, Lebanon can start producing oil or gas, according to energy consultant Rudi Baroudi, within three years.
But in order to attract energy companies and take advantage of potential exploration, Lebanon is in dire need of implementing reforms.
“Lebanon is not a good investment unless the government implements reforms,” says Baroudi, which would provide “the basic guarantees that international companies need to operate with less risk.”
In order to support Lebanon financially, the international community and the International Monetary Fund require the implementation of urgent reforms in several sectors, as part of a comprehensive recovery plan, which was not agreed upon three years ago.
The crisis is accompanied by political paralysis that has prevented the formation of a government for months, and threatens that Lebanon will enter a phase of a presidential vacuum, unless a settlement is reached that leads to the election of a president to succeed President Michel Aoun, whose term ends at the end of this month. This stalemate precludes taking measures to limit the deterioration. Major facilities are now unable to provide services, especially electricity, which is hardly available for an hour or two a day.
Baroudi does not rule out that the energy companies that will invest in Lebanon will choose Cyprus as their headquarters. He says: “Without the rule of law, Lebanon is like a forest.” He adds: “It is an absolute chaos, judicially or financially, or in terms of the regulatory authorities.”
• The international community and the International Monetary Fund, in order to support Lebanon financially, require the implementation of urgent reforms in several sectors, as part of a comprehensive recovery plan, which was not agreed upon three years ago.
• With the increase in global demand for gas, in light of the energy crisis provoked by the Russian war in Ukraine, Lebanon hopes that any marine discovery will contribute to alleviating the severity of the economic collapse.