Lebanon is moving ahead with its energy roadmap despite political tensions as it navigates the path to monetise oil and gas resources and preserve the revenues generated through creating a sovereign wealth fund, the energy minister said.
“We have had meetings with Abu Dhabi Investment Authority (ADIA) and Abu Dhabi Investment Council (ADIC
) because Lebanon is now debating the institution of a sovereign wealth fund and the UAE has preceded us in this path,” Cesar Abi Khalil, Lebanon’s energy minister told Zawya in an interview at Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) this week.
“We will be preparing in the near future a workshop in Lebanon to debate the sovereign wealth fund and we will invite our UAE friends to benefit from their experience in this field,” he added.
Earlier this year, the Lebanese president, Michel Aoun, said that the state’s natural wealth will be preserved for future generations and oil revenues will be deposited into a sovereign wealth fund with the returns invested to finance development projects.
Yet observers fear that political uncertainty, corruption and regional conflicts that have long plagued the country raise some risks of squandering this opportunity to improve the country’s economic conditions.
An International Monetary Fund (IMF) report on Lebanon published at the beginning of this year noted that experience with commodity producing countries shows that becoming an oil producer presents opportunities for growth, but also for corruption and abuse.
“These risks can only be managed if the right policies and institutional arrangements are in place, with proper accountability and transparency,” the fund said.
“There has also been some talk about establishing a Sovereign Wealth Fund (SWF), where proceeds from commodity revenues are initially saved. Of course, a SWF could be considered but would not substitute for a fiscal consolidation and debt reduction strategy,” the IMF notes.
Lebanon currently faces a new political crisis after the Lebanese Prime Minister Saad al-Hariri announced his resignation in a televised speech from Riyadh on November 4. Top officials in Lebanon told Reuters that he was forced to quit.
Lebanon’s president has said he will not accept the resignation until Hariri returns to the country and explains his reasons.
“I do stress that the Lebanese government did not officially resign. Constitutionally, we are operational,” Abi Khalil told Zawya. Roadmap to production
In January this year, Lebanon relaunched its first hydrocarbon exploration and production licensing round after a three-year delay due to political paralysis, which saw the country left without a president for over two years.
“We are still on track and the oil and gas roadmap that has been set forth and approved by the council of ministers back in January 2017 is being implemented,” Abi Khalil said.
“We will elaborate our report to the council of ministers, then we will submit it to the council for the approval. After that, we will be able, if approved, to sign the first contract,” he added.
“We have invited the companies that have submitted their offers for negotiation on the technical offers on the 27th
of November,” the minister said.
Abi Khalil dismissed the notion political roadblocks would derail the development of the country’s hydrocarbon sector, stating that Lebanon has become immune to such events.
“We managed so far to attract the biggest companies in the world. We have Total, Eni and Novatek who submitted offers,” he said.
“We will conclude our licensing rounds with the awarding of the contracts by the end of this year or beginning of next year,” he said.
On September 19, the Lebanese parliament ratified a new oil tax law
, thus completing the legal framework required to start offshore exploration and production. ‘Aggression on Paper’
Lebanon sits on the eastern Mediterranean gas fields discovered in 2009 along with Cyprus, Syria, Israel and Egypt. Two of the discovered fields are subject to disputed maritime borders.
“Lebanon has declared its maritime borders according to international law and we informed the United Nations of our borders,” Abi Khalil said.
“Now I understand there is an Israeli claim in the South, which we consider as an aggression on paper. This will not affect any of our licensing rounds,” he added.
Beirut officials marked ten exploration blocks and seismic surveys estimate the new blocks may contain around 96 trillion cubic feet of natural gas reserves and 865 million barrels of oil offshore.
Lebanon suffers from chronic power shortages, along with a growing debt burden on its economy, and the potential oil and gas reserves could help ease some of these dilemmas.
Abi Khalil says that the system put forth will preserve Lebanese rights and protect the course that the country has embarked on to develop its energy sector.
© ZAWYA 2017