Lebanon's rifts threaten Med gas bonanza

March 21, 2013 at 2:05 PM
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BEIRUT, Lebanon, March 21 (UPI) -- As Lebanon makes its first moves to explore what look like major natural gas fields in the Mediterranean, there are concerns the country's unexpected chance for economic salvation could be wrecked by sectarian rivalries and endemic corruption.

"If ever there was a country that would test the theory of the 'curse of oil' -- the idea that plentiful natural resources can generate more problems than solutions -- it is surely Lebanon," the Middle East Economic Digest observed.

"The country has long been beset by sectarian divisions and conflict. Throwing oil into the mix could easily rekindle some old fires or even starts some new ones."

Lebanon's maritime territory covers nearly 7,700 square miles. So far seismic studies have only been carried out in the southern sector.

But Energy Minister Gibran Bassil claims the survey shows the region contains around 12 trillion cubic feet of recoverable gas. Industry sources are more cautious, putting the total closer to 9.7 tcf.

That's well short of the estimated 25 tcf Israel has found but a little higher than the 7-8 tcf off southern Cyprus.

Lebanon's tally could go as high as 25 tcf once northern waters are surveyed, says Bassil, a Maronite Catholic who's the son-in-law of former army commander Gen. Michel Aoun.

Aoun, who has his eyes on the presidency, leads the Free Patriotic Movement, a Maronite party allied with the Iranian-backed Shiite Muslim Hezbollah.

These and other sectarian/political groups are jockeying for position when bidding for exploration licenses begins in May.

Successful pre-qualifiers have to be able to put up $10 billion apiece for investment in the offshore fields. They also must have Lebanese partners, which is where the big bucks for the country's wheeler-dealers come in.

The controlling body on this will be the Petroleum Authority, formed in August 2012 after lengthy sectarian squabbling. Its six members, who rotate the presidency of the body, are from the most important of Lebanon's 17 recognized sects: the Maronites, Armenians and Orthodox on the Christian side; Shiites, Sunnis and Druse on the Muslim side.

"The real fear is that we blow our one chance of sustainable wealth by allowing compromise, side deals and sectarian interests to get in the way of what should be a straightforward process," noted commentator Michael Karam.

"Although inter-state conflicts and rivalries have for so long formed part of the region's geopolitical landscape, these types of challenges are likely to play a secondary role in the development of the region's natural gas resources," observed Bassam Fattouh of the Oxford Institute for Energy Studies in England.

"After all, the pace of development of gas reserves will be mainly driven by local political dynamics and energy policies within each of the East Mediterranean countries.

"While the formation of the Petroleum Authority in Lebanon last year is a welcome development, the underlying political and institutional dynamics that delayed the bidding round in the first place are still in full swing."

The prevalent assumption in Beirut that energy riches are already within reach "is rather simplistic," he cautioned, since the Petroleum Authority "is most likely to be subject to the same institutional constraints that have plagued most government agencies for the last few decades."

Many Lebanese say they fear the energy wealth will end up in the bank accounts of corrupt politicians, sectarian leaders and government officials, who thrive on a culture of graft and patronage, protected to a large degree by Lebanon's banking secrecy.

"Lack of democracy and transparency, corruption, mediocre leadership, combine to structurally transform an apparent economic blessing into a tool of cronyism and authoritarianism," observed Chibli Mallat, a prominent and Lebanese lawyer and a visiting professor at Yale Law School.

Lebanon's estimated gas reserves are enough to transform the economy, traditionally based on tourism, banking and remittances. The national debt stands at $55.5 billion, one of the highest in the world in per capita terms. Much of that was due to massive reconstruction after the 1975-90 civil war.

"Clearing the national debt, infrastructure rehabilitation and the creation of a sovereign wealth fund are the obvious priorities," Karam said.

But, he concluded, the bleak conclusion is that Lebanon will plod along as it always has done until it throws up a leader who has the courage to change a very corrosive status quo."

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