Lebanon: The Oil & Gas Week, June 10, 2013

Lebanon – Iran:

The Iranian Fars News Agency reported on 02/06 that Lebanese and Iranian officials reached an agreement on expanding cooperation in the oil and gas sector on the sideline of a 5-day exhibition on Iran held in Beirut in May 2013. Mostafa Kashkouli, Managing Director of National Iranian Oil Products Distribution Company (NIOPDC), met with Minister of Industry Vrej Sabounjian, and Minister of Economy and Trade Nicolas Nahhas and discussed Iran’s “participation in building and modernizing oil refineries and gas processing plants in Lebanon.” In addition, and according to Kashkouli, “the two sides reached agreements on conducting exploration operations in the newly discovered offshore fields, transfer of technical knowhow, training courses and development of CNG industry in the country.”

Such declarations must be attenuated. The National Iranian Drilling Corporation was among the six companies, out of 52, that failed to pre-qualify for Lebanon’s first licensing round. In November 2012, the Iranian Minister of Energy Majid Namjoo visited Lebanon and expressed his country’s willingness to assist Lebanon in developing its oil and gas sector. Our observation back then is still valid: Iranian involvement in strategic sectors, such as the oil and gas sector or the defense sector, will be met with strong opposition in Lebanon. “Beirut, for local, regional and international reasons, was never able to respond favorably to such offers, which might indicate that the Iranian offer to help Lebanon’s energy sector is likely to be met with a similar response.” [See “Lebanon – Iran” in our November 26, 2012 roundup].

Lebanon – Economic prospects:

In its recently issued Middle East Macro Monthly report, Citigroup highlighted the importance of exploiting Lebanon’s offshore resources, a “game-changer” at a time the Lebanese economy continues to underperform as a result of the political instability. But Citi warned of the implications of the political deadlock on the country’s efforts to exploit its oil and gas resources and expects Lebanese authorities not to be able to meet the upcoming deadlines.

In an earlier report, issued in February 2013, Citigroup envisaged a positive and negative scenario if Lebanon decides to exploit its offshore resources. A “positive scenario”, in which a cheap supply of domestic gas would have a major impact on the economy given the current energy imports bill, and a “negative scenario” in which repeated delays would prevent the country from benefiting from its offshore resources [See “Lebanon – Economic prospects” in our February 11, 2013 roundup].

Although it did not explicitly say so, Citigroup seems to believe that Lebanon is tilting towards a negative scenario. Until now however, the Lebanese have been able to meet all the deadlines related to offshore oil and gas exploration.

Lebanon – Local politics:

Cabinet formation is virtually put on hold, pending the Constitutional Council’s decision on the legality of the Parliament’s move to extend its mandate [See “Lebanon – Local politics” in The Oil & Gas Week, June 03, 2013]. President Michel Slaiman and MPs from the Free Patriotic Movement (FPM) challenged (separately) the law before the Council. The FPM text [Link in Arabic] mocked the reference to the oil and gas wealth as one of the reasons invoked to justify the extension of the Parliament mandate. “If potential hydrocarbon resources prevents holding elections on time, what would happen once these resources are extracted?”

The conflict in Syria, particularly the last round of combat in Qussair, not far from the Lebanese borders, continues to negatively impact the security situation in Lebanon. GCC countries urged their citizens not to travel to Lebanon. The announcement will affect the already ailing tourism sector ahead of the anticipated summer season.

Previous reports:

Lebanon: The Oil & Gas Week, June 03, 2013
Lebanon: The Oil & Gas Week, May 27, 2013
Lebanon: The Oil & Gas Week, May 20, 2013
Lebanon: The Oil & Gas Week, May 13, 2013
[Oil & Gas Updates]: Weekly Roundup, May 6, 2013