Lebanon Oil and Gas

Key takeaways:

• Lebanese officials have called Lebanon an ‘oil country’ even though no discovery has been made to date – a typical manifestation of building unrealistic expectations which can lead to many troubles down the road.
• Some officials are urgently pushing to set up a Sovereign Wealth Fund (SWF). That makes Lebanon one of the few countries to set up such a fund before any discovery is made. For example, Norway established its SWF almost two decades after first discovery and today it is the largest of such funds and exemplary in its governance. That was partly due to its independence which is highly questionable in a country like Lebanon where such entities risk being highly politicised.
• A petroleum fund is not a prerequisite for successful oil and gas revenue management but a sound fiscal policy is.
• Non-governmental organisations (NGOs) have been pushing for transparency which is good but insufficient. Without accountability, transparency alone is far from being sufficient for good governance.
• The list of poorly managed and corrupt national oil companies is much longer than the successful ones. It takes time to build a competent organisation, especially one which is state owned.
• Until a discovery is made, the geological risk will remain higher in Lebanon compared to neighbouring countries where discoveries have been made.
• The EastMed is a politically fragmented region – a major handicap to efficiently exploit its hydrocarbons potential.
• The maritime border deal between Lebanon and Israel is a positive development that decreases the geopolitical risk in the region. However, the deal does not rule out potential disputes should a discovery be made spanning both territories especially when Lebanon and Israel are still officially at war.