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Potential oil discovery revives hope of new revenue source for Lebanon's economy

[JOSEPH FADDOUL/Al-Shorfa] Lebanese Energy Minister Gebran Bassil explains gas discovery in Lebanese territorial waters.

[JOSEPH FADDOUL/Al-Shorfa] Lebanese Energy Minister Gebran Bassil explains gas discovery in Lebanese territorial waters.

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The Lebanese parliament continues to examine a bill addressing oil resources, especially maritime ones, to arrive at a law covering Lebanon's rights to existing gas and/or oil in its territorial waters.

The discovery of large quantities of gas in Egyptian territorial waters in the late 1990s captured the attention of analysts concerned with the strip of water stretching from Turkey down to Egypt, along the coasts of Syria, Lebanon and Israel. It also raised the level of optimism and interest in these countries, especially after the encouraging results of seismic research in more than one country.

Interest in oil drilling and gas extraction returned to Lebanon after the Norwegian company Petroleum Geo-Services (PGS) confirmed the existence of gas and/or oil at a number of sites near the southern Lebanese coast in 2007.

The Lebanese Parliament and the cabinet have been studying laws related to oil resources as a first step towards entering this field.

"There are different points of view, especially in relation to the governing body of the petroleum sector," said MP Mohamed Qabbani, chairman of the Committee of Parliament Activities.

He said the parliamentary and ministerial committees held successive meeting to discuss the issue, a sign that officials are serious about achieving and instituting these laws.

Qabbani said the Lebanese state, which has delineated its maritime boundaries, now has to lodge this specification with the United Nations… preserving Lebanese rights," Qabbani told Al-Shorfa.

Oil affairs analyst Dr. Rabi Yaghi said the scientific studies PGS conducted revealed several sites adjacent to the Lebanese coast that contain quantities of gas and/or oil that could may amount to a minimum of 25 trillion cubic feet of gas and a maximum of 80 trillion cubic feet, along with a billion and a half barrels of crude oil, if its existence is confirmed.

"Every trillion cubic feet is estimated to be worth about $12 billion, and if Lebanon's share of gas is 25 trillion cubic feet, its wealth is estimated at around $300 billion. If it is 80 trillion cubic feet, the estimates exceed $960 billion," Yaghi said.

Yaghi does not anticipate any domestic barriers to extraction of oil from the sea. Once the petroleum law is adopted, officials will begin soliciting bids for exploration.

Economics expert Dr. Ghazi Wazna said the discovery of oil and gas in Lebanon has major economic implications for the country, adding that precise estimates of the economic value of these two materials have not been made.

ECL Technology, an English petroleum services and engineering company, projected in 2002 the existence of 18 billion barrels of oil in 87 wells valued at $540 billion.

In April of 2009, the US Geological Survey said the basin holds 227 trillion cubic feet of gas reserves, and 7.1 billion barrels of petroleum liquids.

"The most prominent economic value in the discovery of oil is promoting confidence in Lebanon, improving its credit rating, lowering interest rates on public debt and addressing the public debt, in addition to addressing Lebanon's chronic electricity problem which drains over a billion and a half dollars from the treasury each year," Wazna told Al-Shorfa. "The discovery of these resources would also improve the capacity of industry and the agriculture sector."

Wazna pointed to the need for preliminary steps to take advantage of these resources, beginning with action by the United Nations to confirm Lebanon's maritime borders and passage of domestic laws governing contracts with oil drilling companies. The laws need to address how much revenue oil companies can expect.

He cited the importance of establishing a regulatory body for the sector under the Council of Ministers and an independently administered sovereign fund managed without political interference to handle oil and gas revenue.