Why are Lebanese banks struggling with oil & gas knowledge production?


Fransabank released a report entitled “Is Lebanon really an oil and gas producing country?” on July 31.

The report, produced by the bank’s Center for Economic Studies, is filled with inaccuracies and is painfully out of date.

“The MEW is still awaiting the ratification of the “Exploration and Production Agreement”, which gives the selected oil companies the right to explore oil and gas reserves in Lebanon’s “Exclusive Economic Zone” (EEZ)* , as well as the approval of the block delineation decree which specifies the number of blocks to be explored (…)”

These two decrees were approved by the government in January 2017. The report also ignores the organization of a second prequalification round in 2017, which opened the way for more companies to participate in the first licensing round, beside the 46 that qualified in 2013.

Another blunder that is common to virtually all Lebanese banks that have ventured into producing oil and gas reports is the insistence to put a value on Lebanon’s potential wealth… prior to any discovery, and before any exploratory activity has been conducted.

“According to the “Energy Information Administration” (EIA)* , the total estimated value of Lebanon’s gas reserves is nearly USD 163.91 billion between 2020 and 2039. Also, the estimated value of Lebanon’s oil reserves is nearly USD 90 billion for the same period.”

EIA never attempted to estimate the value of potential Lebanese resources. The error is probably due to a misunderstood segment in an oil and gas report produced by another Lebanese bank, Credit Libanais, which also attempted to estimate the value of Lebanon’s yet undiscovered petroleum resources.

In 2014, another prominent Lebanese bank, Bank Audi, estimated that the value of Lebanon’s potential wealth exceeded $600 billion. This number has been on everybody’s lips since then. This is not an irrelevant blunder that could be brushed off. Bank Audi’s $600 billion-figure greatly contributed to inflating expectations about Lebanon’s nascent oil and gas sector.

Also in 2014, a former Minister and chairman and General Manager of Al-Mawarid Bank, claimed in a conference at the Lebanese University that Lebanon’s gas wealth exceeds Qatar’s own gas wealth. He also claimed that its value exceeds $600 billion, perfectly illustrating how a report by a bank, could easily confuse public opinion – citizens, media and public officials.

These are not marginal banks. These are some of the biggest names in the Lebanese banking sector, one of the rare sectors that still inspire confidence and credibility in Lebanon. Perhaps this explains why citizens, media and public officials all take their word for granted, and rarely question the data and analysis they provide.

After an initial period of hesitation, waiting for more concrete developments in the sector, Lebanese banks still appear to be reluctant to “invest” in specialized departments. But they cannot completely ignore the sector. Releasing random reports is the kind of minimum investment they are willing to take at this point to show interest in the sector. Reports that are often poorly drafted and inaccurate.

In a way, Lebanese banks’ own interest in the sector could be seen as an indicator of confidence in the sector. If we were to judge by these reports, we could say there is a certain interest and a willingness to be present, as long as this does not require extra human and financial resources.

In the following report, reserved for clients, MESP examines in detail the weaknesses of Lebanese banks’ in-house oil and gas production, and evaluates how Lebanese media has covered the launching of these publications and how this coverage has changed over time.