Lebanon can drill for oil once legislation is in place
Actual Exploration could start within the next three to five years

By Dana Halawi - Daily Star staff
Energy and Water Minister Jibran Bassil said oil exploration legislation in Lebanon will be ready in 2011 while real exploration will start in three to five years. “We will be getting foreign companies to do the job and it will not cost the government a penny,” he told The Daily Star. He added that after adopting this law, “we will be entering a new phase of legislative efforts to issue the executive decrees and deal with the concerned companies and corporations.”

“We will be adopting the revenue-sharing agreement that will ensure good governance and transparency so the Lebanese treasury will not have an additional burden,” the minister said.

Bassil also pledged to work hard on amending laws and legislation that would allow Lebanon to start with its oil-resources exploration process in the near future.

“I am ready to work with the private sector so that we can amend our laws and legislation. But first we need to enforce the existing ones within the same framework,” he added.

Bassil expressed some of his concerns about the laws that are to be amended in this field.

“The existing oil resources in Lebanon,” which he referred to as “black gold,” are a “national wealth and they should not be wasted to service the public debt or cover the deficit,” he said.

“We should transform the black gold into real gold which is an important resource for Lebanon and which can provide our state with the necessary revenues and which guarantees for our economy and its prosperity,” he added.

“Therefore our laws should be very clear on this issue to protect this resource,” Bassil said.

His remarks came during a conference held at Gefinor Rotana Hotel in Beirut. It was organized by First Protocol in collaboration with the Association of Petroleum Importing Companies (APIC) and Audi Saradar Group in the aim of discussing the challenges facing Lebanon in the exploration of its oil resources.

Among the speakers at the conference were Ambassador of Norway in Lebanon Mrs. Audlise Norheim; Fabrizizio D’Adda, an Italian energy expert; Elie Daher, director of Technical Consulting Schlumberger consulting; Walid Abou Sleiman, chairman of Aksys Capital; and Bernard Ammoun, of the Green Alliance, Lebanon.

Ambassadors of other nations also attended the conference.

The speakers focused on the experience of their countries and companies in oil-and-gas exploration. They all underlined the need to issue new oil legislation in Lebanon before exploring for oil.

In his speech, Bassil emphasized the importance of ensuring the minimum criteria of transparency and good governance to be provided by the Lebanese administration and government as a guarantee.

He underlined the importance of increasing the oil-storage capacity in Lebanon but said the country had the necessary infrastructure for that.

“All international firms have a vested interest in working in Lebanon. We have the necessary infrastructure to do that. We have the land, the coast, the storage facilities. But of course we need to increase our storage capacity. Otherwise we will be facing a true disaster whenever we have political crises and military attacks or even when we have oil crises,” he said.

Bassil said Lebanon should also take care of its refineries. “Lebanon should be ready for the next cycle because in the future there will be a high demand on oil refineries. And we need to benefit from our geographic location to take advantage of the situation,” he added.

He said Lebanon’s national budget has also taken into consideration the building of an internal gas pipeline from Tripoli to Zahrani.

“This will allow us to cater to the industrial needs and to distribute gas to the different households in Lebanon through the new pipelines,” he said.

“Most importantly we will also be able to supply the electricity power plants from the north to the south. These power plants will be able to obtain the gas and this of course will save billions of dollars for our treasury,” Bassil said.

APIC President Maroun Chammas said the import operations today are conducted by 14 companies and the market enjoys uninterrupted stable supply and fierce competition to the benefit of the consumer who is witnessing enhanced services.

“More than $1 billion has been invested by the private sector in thermal infrastructure alone and these companies today collect close to $1 billion a year for the state taxes,” he said. “There are more than 2,000 trucks to transport refined products in Lebanon and more than 2,500 service stations operating, many of them without a license,” he added.

He said that the government created a price formula in the 1990s that it issues on a weekly basis; it sets the price for the consumer based on the average of the preceding four weeks by adding cost elements to render the product in Lebanon.

He added that the values of the elements of the pricing formula had not changed since 2003 and the companies have on several occasions asked an activation of the numbers to reflect the changes that occurred over the past seven years.

“The previous governments were always focused on political and social priorities. We are hoping this government will address this matter,” he said.

“The 14 private terminals have been keen on self regulating and upgrading their facilities to abide by international health and safety standards – a prerequisite in order to be able to receive vessels.”

Ziad Hayek, secretary general of the higher council for privatization in Lebanon, and one of the participating speakers at the conference, underlined the importance of partnership between the private and the public sector for investments in building energy production and distribution stations. “The private sector is able to partly or totally fund this project in addition to making sure that the implementation takes place at the right time,” he said.

He added that the importance of granting such projects to the private sector stems from the fact that this would enhance the quality of services offered due to the availability of more skilled people working in the private sector.

On the other hand, energy and privatization consultant Roudi Baroudi said that the key factor for minimizing cost and risk of supply in energy sourcing was diversifying the nature and origin of the fuel mix necessary to fulfill domestic energy needs.

“That would lower and offset the price volatility of the different commodities as well as the political risk of relying on a single producing and supplying country,” he said.

Aiming at a deeper diversification, he added that new legislation should be adopted simultaneously to promote and enhance domestic and foreign investments in exploration and production of fossil fuels (gas and oil), particularly by offering guarantees to the operators of a sound and reliable environment for the required exploration and production investments and subsequent management of production-sharing agreements.