Lebanon: The Oil & Gas Report, March 24, 2014

Parliamentary debate: oil & gas dwarfed by more pressing issues

Prime Minister Tammam Salam’s cabinet won a confidence vote in parliament on March 20, after two days of heated debate. The cabinet secured the backing of 96 MPs of the 101 who attended the session (out of a total of 128 MPs).

Oil and gas issues, though briefly mentioned by some of the MPs, were, as expected, dwarfed by discussions over the more pressing political and security situations. The policy statement, based on which the cabinet won the Parliament’s confidence, refers to oil & gas in the following paragraph (unofficial translation):

The government will pay special attention to the oil and gas file, and commits to pursue and speed up the procedures related to the organization of the first licensing round. The government emphasizes its adherence to Lebanon’s full rights within its waters, including to its oil and gas wealth, and commits to accelerate the necessary procedures to confirm its maritime boundaries, particularly in the areas disputed by the Israeli enemy.

The two-day debate at the parliament could have been an opportunity to interrogate the new Energy Minister Arthur Nazarian over his plans for the Ministry, or lash out at his predecessor (and current Minister of Foreign Affairs) Gebran Bassil’s record. MPs avoided confrontation, which suggests there is no intention, at this stage, to derail the Energy Minister’s work. Instead of questioning, MPs focused on either the need to pursue the tender (Free Patriotic Movement’s Ibrahim Kanaan, Future Movement’s Mohammad Kabbani…) or to assert Lebanon’s rights over all its Exclusive Economic Zone and the need to ensure its protection (Hezbollah’s Mohammad Fadlallah).

The main obstacle for pursuing the first licensing round appears to be, at the moment, the government’s expected preoccupation with more pressing issues, including the security situation and the presidential election, knowing that the mandate of this cabinet is theoretically supposed to expire by May 25, 2014 (see “How long is this cabinet expected to last?” in our February 24, 2014 report).


Former minister’s gas remarks highlight the need for a more professional approach

The Faculty of Economics and Business Administration at the Lebanese University hosted a conference on March 20 on the challenges facing the Lebanese economy. Participants included former Minister of State Marwan Kheireddine, a member of the previous Mikati cabinet (2011-2014). Kheireddine sought to reassure the audience on the state of the economy (“not as bad as it might seem”), and got carried away when talking about gas resources. Not only did he value the gas wealth at around $600 billion (a number made popular by a recent report published by Bank Audi, a leading local bank, which claimed proceeds from gas extraction could easily exceed $600 billion), and anticipated the exploitation of these resources to create 400,000 (direct and indirect) job opportunities, he also claimed that Lebanon’s gas resources exceed those of Qatar!

That this is confidently stated in front of students by a former minister, a member of a cabinet that discussed the organization of the developing oil and gas sector on a regular basis, is indicative of how poorly the subject is understood, including at the highest levels of the State. That he is also the chairman and General Manager of Al-Mawarid Bank, another well established local bank, reveals that the confusion surrounding the subject is even broader.

The economic section of most newspapers reproduced excerpts of the minister’s speech the following day, with some highlighting his claim that Lebanon’s gas resources exceed those of Qatar. Training journalists on how to cover oil and gas issues is already being addressed, with several initiatives being implemented now, many of which are funded by foreign donors (including the Norwegian embassy). But more professionalism in addressing the subject is required by State officials and financial institutions.


Ministry of Energy lacks an appropriate communications policy

Former Energy Minister Gebran Bassil is suing Executive Magazine, a local magazine, over an article published in October 2013 containing allegations of malpractice. The journalist interrogated Bassil over the fate of the $33m made through the sale of seismic data. Although the Minister has been asked this question many times before and after this interview, providing each time the correct answer, he was unable to provide the Executive journalist with a proper response (first blunder). It is only two months after the publication of the article (second blunder) that the Ministry asked for the right to publish a clarification, which failed to mention the $33m (third blunder). This series of blunders led to a fourth one, which is suing the magazine (always a communication mistake when initiated by a political official, regardless of how right or wrong the allegations are). Such errors are unfortunately not isolated events and highlight the need for an appropriate communications policy, which includes crisis communications.


Lebanon’s EEZ: Lebanese Navy expecting a major overhaul

An expert level meeting will be held in Rome on April 10 to devise a support plan for the Lebanese army. The Lebanese navy, long neglected, is getting increased attention, and can expect to receive some much needed equipment, including patrol vessels and radars. As part of the $3 billion Saudi donation to equip the Lebanese army with French weapons, the Lebanese are evaluating a French proposal to acquire four Adroit, a Gowind class offshore patrol vessel, equipped with Mistral missiles. This renewed interest in the Navy, and foreign willingness to boost its capabilities to allow it to control the country’s EEZ, is primarily motivated by a desire to address short-term pressing problems, including the need to (1) control the illegal transfer of weapons passing through Lebanon and intended for non-state actors (in Lebanon and neighboring countries) that has flourished in past years; (2) and to control illegal immigration (a major source of concern for European countries). It also addresses medium-term challenges such as the need to (3) protect offshore resources.

The French are in competition with the Italians, who have their own plans to equip the Navy. The expert level meeting in April, which will be followed a few weeks later (date tbd) by a ministerial level meeting also to be held in Rome, will provide an opportunity not only to evaluate the different support programs but also the level of political commitment which reveals a desire to strengthen a country’s presence in Lebanon and the region.

Three points related to the security of the EEZ deserve to be highlighted: (1) President Michel Slaiman has invited the various political factions to a new round of national dialogue sessions, centered on discussing the national defense strategy; (2) upgrading the Armed Forces’ capabilities is one of the current cabinet’s main priorities and (3) the Arab Foreign Ministers’ meeting, which was held in Kuwait on March 23, approved the proposal of the Lebanese Foreign Minister to support the Army by providing it with the necessary funding and equipment.


Previous issues:

Lebanon: The Oil & Gas Report, March 10, 2014
Lebanon: The Oil & Gas Report, February 24, 2014
Lebanon: The Oil & Gas Report, February 10, 2014
Lebanon: The Oil & Gas Week, January 27, 2014
Lebanon: The Oil & Gas Week, January 13, 2014

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