Lebanon: The Oil & Gas Week, May 13, 2013

Lebanon – Local politics:

Over a month after his appointment, on 06/04, Prime Minister-designate Tammam Salam still did not succeed in forming a new cabinet. The composition of the cabinet is the major problem Salam is facing at this stage, with March 8 and allies demanding veto power (i.e. a third of the ministers, at least). Once the composition is settled, Salam will have to deal with the distribution of key ministerial portfolios and March 8’s refusal of rotation among parties and sects. Amid these difficulties, it was rumored in the past few days that Salam may choose to form a fait accompli cabinet, which may exclude March 8 and allies. Such a decision will have legal implications, whether the cabinet obtains the Parliament’s confidence or not. Once the decree forming the cabinet is issued (signed by the President and the Prime Minister), and even if the latter does not gain the Parliament’s confidence, it will become the new caretaker government. The Ministry of Energy and Water, like all other ministries, will be headed by a new caretaker minister. If such a scenario does take place (although we believe it is unlikely, unless the process drags on), Salam would likely choose a lineup that would not provoke the new opposition (March 8 and allies). It is unclear who he would appoint as Minister of Energy and Water. PSP leader Walid Joumblat would like to see his protégé Bahij Abou Hamze take up Gebran Bassil’s responsibilities. For the moment, nothing indicates that he will be able to impose him. One thing is sure though: Abou Hamze’s name has never been googled that much, and MESP, who anticipated Joumblat’s move to back him for the position in a previous report, can attest to that [see “Lebanon – Internal politics” in our April 1st, 2013 roundup].

Lebanon – Petroleum Administration:

Baath Party MP and member of the Energy and Water Committee at the Parliament, Assem Qanso, called for the creation of a new regulatory body that would be in charge of administrating petroleum activities onshore. The current Petroleum Administration, he said, is too focused on offshore activities. Qanso has previously slammed the regulatory body’s board members who were selected on sectarian basis. In a country where public institutions are required to maintain some sort of sectarian balance, such an accusation may sound odd. Qanso, who holds a degree in geological engineering from the University of Zagreb, has repeatedly called for surveying the northern areas of the Bekaa Valley, his native region, where he strongly believes there are good chances of finding oil. A second regulatory body, in charge of administrating petroleum activities expected to be focused in his native region, may offer him a chance to be better represented at the institutional level and to reap the benefits. Caretaker Energy Minister Gebran Bassil was quick to dismiss the idea. In the speech he gave at the Arab Economic Forum on 10/05, he indicated that the current Petroleum Administration will also be in charge of administrating petroleum activities onshore.

Lebanon – Academic formation and programs:

Caretaker Energy Minister Gebran Bassil stressed on the need for local universities to provide petroleum-related degrees, on two separate occasions this week: during a conference on hydrocarbon resources at Sagesse University on 09/05, and during his speech at the Arab Economic Forum on 10/05. Focusing on education and building new skills was one of MESP’s earliest recommendations to the Lebanese government. But we insisted on making it part of a national strategy that would study and define the needs of the local oil and gas industry before proposing relevant programs to cater to these needs. A quick look at the dozens of local universities and the diplomas and degrees they already offer is enough to detect the lack of coordination, which results in thousands of newly-graduates flooding the job market every year and unable to find a job. Students following a petroleum-related diploma or advanced degree  will be on the market in three to five years, depending on the programs. But those will have no experience at first. During the first few years, Lebanese formed and trained abroad would be advantaged, because they could boast several years of experience in oil and gas projects around the world. These should also be encouraged to return and work in Lebanon, but they can only be persuaded if a sound environment is in place.

We believe universities should be encouraged to offer the necessary degrees, but this should be part of a coordinated policy that encourages partnerships between local and foreign universities, and, more importantly, between local universities and international oil companies, as part of a broader offset policy [see “Lebanon – Offset” in our January 14, 2013 roundup]. The partnership between Total and Saint Joseph University, which is going to offer an advanced degree in oil and gas as of September 2013, is a good example [see “Lebanon – Academic formation and programs” in our March 25, 2013 roundup]. Other companies planning on participating in offshore oil and gas exploration would be advised to propose similar initiatives. Companies that will be awarded licenses will be required to hire 80% of their workforce from Lebanon. This is an ambitious target that further highlight the need to build and form new skills in Lebanon, in addition to attracting Lebanese working in the field abroad.

Lebanon – First licensing round:

During a seminar on “Oil and Gas in Lebanon and the Eastern Mediterranean” organized on 10/05 by al-Iktissad Wal-Aamal Group, under the patronage of the Ministry of Energy and Water, caretaker Energy Minister Gebran Bassil announced that among the 46 companies eligible to participate in the bid, 43 have requested (and received) the book of conditions and the model contract, which show that interest in Lebanon’s offshore resources remains high despite the current political deadlock. Bassil also revealed that early estimates of data currently being processed show a potential of 30 trillion cubic feet of natural gas and 440-660 million barrels of oil, in only 10% of the surveyed area (which constitute around 70% of Lebanese waters). Potential reserves, he said, could be much larger than that. Bassil, as well as other participants in the seminar, insisted on the need to build local capacities and to encourage universities to provide petroleum-related studies [see “Lebanon – Academic formation and programs” above]. Unless local capacities are developed, the condition imposed on right holders to hire 80% of their workforce in Lebanon will mostly benefit low-skilled labor.

The seminar provided an opportunity for caretaker Energy Minister Gebran Bassil and his team to present the work that has been accomplished in the past two and a half years and to provide the audience with the latest updates regarding offshore oil and gas exploration. Among the achievements: drafting the Offshore Petroleum Resources law, over 30 decrees supporting its implementation (only two still need government approval), scanning 70% of Lebanon’s territorial waters, forming the Petroleum Administration, organizing the pre-qualification round and launching the country’s first licensing round etc. An immense effort, by Lebanese standards, that lead us to hope that, whoever is chosen to head the ministry afterwards, would maintain a similar level of productivity. The conference provided an additional local, regional and international exposure to Bassil and his team. The personalization of the debate surrounding the Ministry of Energy is ongoing [see “Lebanon – First licensing round” in our May 6, 2013 roundup], but Bassil and his team are centering their defense on their policies and achievements. Attacks from their opponents have usually avoided policy discussion and constructive criticism, which does not help to build their case. Instead, they are becoming increasingly personal, some even suggesting this week that if Bassil were to die, the news would be welcome (Future Movement MP Ghazi Youssef commenting on the booklet published by the Ministry of Energy, mentioned in our May 6, 2013 roundup).

Scroll to Top