Prime Minister Saad Hariri announced the formation of a 30-member national accord government on December 18. This is a short-lived government whose main task is to adopt a new electoral law and organize parliamentary elections in Spring 2017 (with a possible “technical postponement” of a few months).
The new government will also face tremendous challenges: security situation, a sluggish economy and deteriorating government services, spillovers from the Syrian war and the socio-economic impact of the influx of hundreds of thousands of refugees. A long list of issues that might divert the government’s attention away from the energy sector. Yet, we believe the new government would be sending positive signals to investors if it decided to pass the two missing oil and gas decrees that are needed to pursue the offshore tender, on hold since 2013: a decree defining offshore blocks and their coordinates, and another one approving the tender protocol and the model exploration and production agreement. In addition, a new petroleum tax law must be adopted by the Parliament and a decision on whether or not to organize a second pre-qualification round, considering three years have passed since announcing the results of the first round.
Cesar Abi Khalil will be heading the Ministry of Energy and Water over the next few months. A member of the Free Patriotic Movement (FPM) and long-time advisor to former Minister of Energy and Water Gebran Bassil, he accompanied the sector’s development since 2009 when its bases were being laid, and contributed to devising the Policy Paper for the Electricity Sector. A relevant experience which make up for the absence of a direct technical background in the field. Once again, the keyword for the coming period is continuity. Whereas the previous Minister, Arthur Nazarian, was “only” an ally to Gebran Bassil’s FPM, Abi Khalil is an official member and a close aide and confident of Bassil. This will help running the Ministry’s affairs smoothly and efficiently over the next few months.
The only downside: The key decisions that need to be made to put the sector back on track, including decisions related to the first licensing round or to border disputes, do not fall within his responsibility, but are rather a government responsibility. A broad enough consensus among the political class is still needed to move things forward. In this regard, and as we have said on previous occasions: the deal between Berri and Bassil is a positive sign. It is necessary, but on its own, it is not enough. It should be perceived as a preliminary step, laying the ground for a broader, national deal. Once a broad enough consensus is achieved, we can move forward… provided market conditions are favorable.
Our clients can request the rest of this report which includes a profile of the new Minister and the key measures he is expected to take in the coming months.