Lebanon: The Oil & Gas Report, May 05, 2014

Will the current political deadlock discourage international companies and partners?

The Presidential election, although far from reaching a decisive stage, is dominating the local political agenda. President Slaiman’s term will expire in May 25 and there are serious doubts a President will be elected in time. The return of Saudi ambassador Ali Awad Assiri to Beirut after months of absence may signal a Saudi willingness to dialogue. If it is met with similar willingness from the other sides, this may help to ease the current political deadlock. The deadlock is being felt on other dossiers, including the approval of the two missing oil and gas decrees that are necessary to pursue the first licensing round, progress on the maritime border dispute and the final approval of the Saudi-Lebanese-French operation to equip the Lebanese Armed Forces.

  • Discussions over the oil & gas decrees

The Petroleum Administration is pursuing its efforts to push for the adoption of the two missing oil and gas decrees. The ministerial committee tasked with studying the decrees is expected to hold a meeting on May 08, but, in the meantime, the PA has been holding separate meetings with members of the committee to answer their questions. Discussions are promising and professional, but there is no guaranteed outcome before reaching the final stage, where the political factor is expected to come into play again. A breakthrough is still hoped, but it will require breaking the political deadlock. If this comes during the month of May, it will leave enough time to hold the tender on time, without having to postpone the deadline to submit bids (August 14, 2014).

  • Maritime border dispute

Middle East Strategic Perspectives gave an interview to Interfax (Natural Gas Daily) on April 07, during which we noted that U.S. Deputy Assistant for Energy Diplomacy Amos Hochstein’s proposal to settle the maritime border dispute, which was reportedly submitted to Lebanese authorities in November 2013, was considered by the Lebanese side as “a good start, but one that still needs some fine-tuning”. The info was reproduced by the Israeli business magazine Globes (22/04), but with a negative twist, adding that talks on solving the dispute between Lebanon and Israel “are on the rocks”. The Globes report and conclusion were widely reproduced by Lebanese media, always interested in issues related to the border dispute. Hochstein, who had just concluded a visit to Lebanon, with mixed results due to differences with Speaker Nabih Berri, issued a clarification saying that efforts to resolve the dispute were “making progress”. This is not the first time that Globes publishes inaccurate information regarding U.S. efforts to settle the border dispute. Back in October 2013, it announced that Israel “rejected a U.S. compromise on the dispute with Lebanon”, which was similarly widely reported by Lebanese media, prompting Hochstein to categorically deny it in an interview with Middle East Strategic Perspectives in November 2013.

  • Security of offshore installations

Securing the Eastern Mediterranean and future offshore installations is gaining increased attention, as noted by a number of participants on the side of the Global Offshore Technology conference held in Cyprus on 28-29 April, with Lebanon sometimes referred to as the “weak link”. The Lebanese army, which received a $3 billion Saudi donation to buy French weapons, has finalized the list of materials it would like to acquire. However, the implementation of the project still needs a final approval, which also depends on breaking the current political deadlock. According to French media, the Gowind class offshore patrol vessel, Adroit, produced by DCNS, has been replaced with patrol vessels produced by CMN (owned by Franco-Lebanese businessman Iskandar Safa), equipped with MBDA’s Simbad-RC systems.


Lebanon: Introducing Economic Diplomacy to Promote Investments

Economic diplomacy is a largely neglected concept in Lebanon. The Ministry of Foreign Affairs organized a workshop on Effective Diplomacy in Beirut (30 April – 03 May), for the Lebanese diplomatic corps, focusing among other things on the concept of economic diplomacy. In his speech, former Energy Minister and current Foreign Affairs Minister Gebran Bassil insisted on the need to promote Lebanon as an attractive destination for oil and gas investments. Back in April 2013, MESP made the following observation and recommended boosting the capacities of Lebanon’s diplomatic corps to promote the country’s economic and commercial attractiveness:

Lebanon – Diplomatic missions:

Embassies and consulates are a vital element in the promotion of a country’s economic and commercial attractiveness. Lebanon’s modest-sized economy and industry may explain why Lebanon never really developed what some refer to as “economic diplomacy”. Lebanese representations abroad rarely engage in promoting bilateral trade and investments. Their programs include, at best, holding seasonal expositions displaying some of the country’s export products. There is no vision, nor a pre-defined strategy of how to promote Lebanon as an attractive destination for foreign investments. Perhaps the potentially large deposits of oil and gas off the Lebanese coast would provide an opportunity for officials to reevaluate their policies and the responsibilities of their diplomatic representations abroad. The Ministry of Energy and Water and the Petroleum Administration are doing a decent job promoting the country abroad. But their resources are limited. It is impossible, for example, to engage with the business community and local authorities in different countries around the world and to attend every oil and gas conference. A comprehensive job cannot be done unless it is backed by the economic or trade sections in Lebanese embassies and consulates.

We applaud Bassil’s initiative, but for it to be successful two conditions must be met: It needs (1) strategic planning and quantifiable objectives, and (2) specialized training for diplomats, which includes improving cooperation and communication between ministries, and between the different departments within a ministry. In other words, it needs a cultural revolution, which we, unfortunately, do not see coming.


ESA serving as a vehicle of influence in Beirut and Paris

The Ecole Superieure des Affaires (ESA), one of Lebanon’s leading business schools is organizing the “Oil & Gas: Lebanon’s Wealth Forum” on May 9, 2014, under the patronage of President Michel Sleiman and in cooperation with the Forum for National Dialogue, a local political party, and the MEREF (Movement of French Enterprises and Economic Representations in Lebanon, which includes Total). Energy Minister Arthur Nazarian and members of the Petroleum Administration will be among the speakers.

The ESA perceives the possible development of a local oil and gas sector as an opportunity, and intends to bring in its own contribution. A senior management source told MESP recently that a Masters degree in petroleum business management is being planned. The school was established in 1996 following an intergovernmental agreement between France and Lebanon and is managed by the Paris Ile-de-France Regional Chamber of Commerce and Industry. It has therefore strong links with France and French businesses. It has served as a vehicle of influence both for French businesses seeking to establish or strengthen their presence in Lebanon, and for Lebanese individuals seeking business or political influence in Paris. It is interesting, and to a certain extent regrettable, that Lebanese business tycoon Fouad Makhzoumi, still after a breakthrough in Lebanese politics, chose to be involved in this conference as the head of a political party rather than as the founder and CEO of Future Pipe Industries, a world leader in fiberglass pipe industry. Though it may be understandable for ESA to seek collaboration with Makhzoumi for various reasons, for French businesses on the other hand, a business collaboration would have been more valuable than a collaboration with a political party with little influence in local politics.

Middle East Strategic Perspectives and Le Commerce du Levant will be conducting a series of interviews with participants in the conference, which will be published on the business magazine’s website and its paper edition. 


Previous issues:

Lebanon: The Oil & Gas Report, April 21, 2014
Lebanon: The Oil & Gas Report, April 07, 2014
Lebanon: The Oil & Gas Report, March 24, 2014
Lebanon: The Oil & Gas Report, March 10, 2014
Lebanon: The Oil & Gas Report, February 24, 2014

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