Lebanon feuds could hurt its quest for gas

April 25, 2013 at 3:16 PM
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BEIRUT, Lebanon, April 25 (UPI) -- Lebanon's political and sectarian rivalries, along with its maritime dispute with Israel, could hamper the country's drive to exploit large natural gas fields in the eastern Mediterranean, a new study warns.

An analysis by Oxford Analytica cautioned that corruption endemic among Lebanon's political class is likely to cloud the resource-poor country's effort to develop extensive gas production that has the potential to transform the anemic economy by easing a massive national debt.

The government last week announced the debt has risen to $58 billion, more than 135 percent of its annual gross domestic product and the highest in the region.

"Thus far the only step Lebanon has taken to mitigate these potential effects has been through plans to establish a sovereign wealth fund," Oxford Analytica observed.

"Communal rivalries risk impeding its progress. Sectarian groups dominate the political system and infighting could represent a major hurdle to oil and gas production if a zero-sum mentality ensues."

The political divisions were exemplified in the prolonged deliberations to appoint a Petroleum Authority to supervise and regulate the planned energy industry.

It took months of squabbling between Muslim and Christian sects before the six-member body was named in late 2012, with, Oxford Analytica observed, "appointments based on the need to appease member of each confessional group rather than on merit."

Oxford Analytica's comments reflect a considerable body of opinion within Lebanon but, more importantly, and among the international companies that will have to invest billions of dollars in deep-water exploration off Lebanon to extract the estimated 12 trillion cubic feet of gas that lies in the blocks on offer.

These are only part of Lebanon's Exclusive Economic Zone and the pickings could become much richer.

But in Lebanon, even at the best of times, sectarian rivalry smolders between Muslims and Christians, and worse, between fractious subsets on each side, all controlled by a small cabal of billionaire clans.

Every few years these rivalries explode, as they did during the 1975-90 civil war.

The increasingly sectarian war in neighboring Syria, whose often brutal dominance of Lebanon over the last few decades deliberately fostered confessional differences the better to have its rapacious way, are already spilling over into Lebanon and could, if left unchecked, explode again soon.

That will dash hopes of gas exploration, no transformation of an economy based on tourism and banking secrecy, no prosperity to be pillaged by the country's robber barons.

The Lebanese, because of their eternal squabbling, are as much as seven years behind Israel, whose energy program is far ahead of everyone else's in the region.

Israel began production from its Tamar field, the first strike made in 2009, a few weeks ago.

Cyprus is well into exploration of its Aphrodite field which abuts Israel's biggest field, Leviathan, discovered in 2010 and due to go onstream in 2014.

But Lebanon's late entry into the gas business means others will have staked out export markets, leaving Lebanon to pick up what it can just as the market for gas is becoming saturated, with immense volumes of shale output expected to emerge in the coming years.

Israel, with estimated reserves of 25-30 tcf and counting, has even made up with Turkey, ending what was an often vitriolic three-year rift, amid strong indications of a joint effort to construct an undersea pipeline from Israel to Turkey's Mediterranean terminals to supply Europe.

Since the Lebanese won't talk to Israel about demarcating their disputed maritime boundaries because they're still technically in a state of war, any mediation to resolve that could take years -- if it happens at all.

"An energy and diplomacy deal that would reshape the map of the eastern Mediterranean might be proceeding faster than many people think," the Financial Times cautions.

Despite Turkey's quarrel with Greece over war-divided Cyprus, the Cypriot fields could be included in the expected Israel-Turkey deal.

That will depend on what export program Israel decides on, as it's expected to do by mid-May.

Turkey's determined to become the pivotal energy hub in the Middle East and Central Asia, and seems to be pragmatic enough to decide it has to settle the 40-year-old Cyprus problem to make it all happen.

Lebanon's first licensing round, with 46 companies expected to bid, is to start May 2.

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