We want to take another look at what's going on in Lebanon--in terms of the spillover of the conflict in Syria, the meddling of external actors, and the internal political stalemate, which are all coalescing to keep the country from tapping into the massive reserves of the Levant Basin while it watches Israel race to the finish line.
First things first. How much oil and gas are we talking about? Surveys are being conducted as we speak, and so far so good. Lebanon's caretaker energy minister, Gebran Bassil, came out earlier this week saying that with only half of the surveying complete, it looks like estimates are much larger than previously thought. He's being cautious in his statement, noting that "the current estimate, under a probability of 50 percent, for almost 45 percent of our waters has reached 95.9 trillion cubic feet of gas and 865 million barrels of oil."
Up for grabs-eventually-will be 10 exploration blocks of 1,500-2,500 square kilometers each in Lebanon's portion of the Levant Basin.
We already know the Levant Basin-an 83,000-square-kilometer oil and gas behemoth in the eastern Mediterranean-is prolific. Back in 2010, the US Geological Survey estimated that the entire basin holds somewhere in the neighborhood of 122 trillion cubic feet of recoverable natural gas and 1.7 billion barrels of recoverable oil. Sharing in the Levant Basin wealth we have Israel, which has already made sizable discoveries, the Palestinian Territories, Lebanon, Cyprus and…
We want to take another look at what's going on in Lebanon--in terms of the spillover of the conflict in Syria, the meddling of external actors, and the internal political stalemate, which are all coalescing to keep the country from tapping into the massive reserves of the Levant Basin while it watches Israel race to the finish line.
First things first. How much oil and gas are we talking about? Surveys are being conducted as we speak, and so far so good. Lebanon's caretaker energy minister, Gebran Bassil, came out earlier this week saying that with only half of the surveying complete, it looks like estimates are much larger than previously thought. He's being cautious in his statement, noting that "the current estimate, under a probability of 50 percent, for almost 45 percent of our waters has reached 95.9 trillion cubic feet of gas and 865 million barrels of oil."
Up for grabs-eventually-will be 10 exploration blocks of 1,500-2,500 square kilometers each in Lebanon's portion of the Levant Basin.
We already know the Levant Basin-an 83,000-square-kilometer oil and gas behemoth in the eastern Mediterranean-is prolific. Back in 2010, the US Geological Survey estimated that the entire basin holds somewhere in the neighborhood of 122 trillion cubic feet of recoverable natural gas and 1.7 billion barrels of recoverable oil. Sharing in the Levant Basin wealth we have Israel, which has already made sizable discoveries, the Palestinian Territories, Lebanon, Cyprus and Syria.
Investors Wait on Politics
A total of 46 companies were approved to participate in bidding for Lebanon's 10 offshore blocks back in April this year, and while no one has withdrawn yet, interest is waning as frustration mounts. The auction was set to take place first in November and then on 10 December this year, but has been moved back another month, to 10 January 2014, and even that date is not certain.
That date is not certain because it hinges on Lebanon having a new Cabinet in place. Without a new Cabinet, the necessary decrees-including a revenue-sharing model--to start the bidding process cannot be approved. Potential investors are growing increasingly impatient.
Alternatively, Bassil has been pushing for the caretaker Cabinet to convene a special session to endorse the decrees itself. This isn't happening on the surface because it's an unprecedented move that breaks with protocol. Caretaker prime minister Najib Mikati is a major kink in the chain here and the force behind the refusal to convene a special cabinet session to approve the oil decrees, citing constitutional hindrances.
Beyond this, there is bickering over the number of blocks that should be up for bidding in the first round. Bassil is proposing that only five of the 10 blocks go up in the first round, while Parliament Speaker Nabih Berri is pushing for all 10 blocks to be auctioned simultaneously. Both, however, want the Cabinet to convene a special session on the decrees.
There is some concern, also, that if the caretaker Cabinet passes these decrees there will be less pressure to form a new government quickly. The World Bank has made it clear that donor countries won't come to its rescue in the face of an explosive Syrian refugee crisis until a new Cabinet is formed.
The longer this process takes, the more the situation between Israel and Lebanon intensifies, with some forces in Beirut concerned that Israel could tap into Lebanon's underwater reserves from its own portion of the Levant Basin. But this is part of the internal political battle as well.
Speaker Berri's public perspective is that the Cabinet must convene on the oil decrees in order to confront what he calls "continuous Israeli threats" to Lebanon's exploration territory. Lebanon and Israel both lay claim to roughly 850 square kilometers of this basin. The Israeli threat may be real, or it may just be a convenient pressure point for those who wish to see the caretaker Cabinet act on oil immediately-or it may be a bit of both.
So we have the traditional coalitions-March 14 and March 8-taking up the two sides of this dividing line for what seems an eternal stalemate. March 14 stands against a special Cabinet session, while March 8 continues to push for it.
Adding yet more uncertainty to political stability is the fact that President Michel Sleiman's six-year term ends on 25 May 2014-so we have presidential elections to deal with in seven months as well. Either Sleiman will be elected for another term by pushing through a three-year extension, a new president will assume the post from myriad candidates already on the campaign trail, or the Parliament be deadlocked on the issue, leaving another political vacuum.
Sleiman himself was a "consensus" candidate, so it is possible that he will see his term extended for three years in May.
The Syria Fallout
It will not be Syria that is Lebanon's undoing-at least directly, though the Syrian refugee crisis is pushing the limits of socio-economic dynamics-it will be Beirut's internal squabbling and its inability to form a new Cabinet. Everything depends on this right now.
The longer this takes the more concrete the spillover from Syria becomes. While Beirut has largely been spared, the northern port city of Tripoli has not. A week of heavy clashes between Sunni and Alawite gunmen that began on 21 October and killed 13 people in seven days is cause for concern.
The Saudis are attempting to portray Lebanon as on the brink of civil war due to Hezbollah's involvement in the conflict in Syria, but we caution against the Saudi perspective. The Saudis have been wrong-footed in Syria due to Washington's decision not to launch air strikes and its subsequent move to latch on to a Russian resolution plan, as well as its diplomatic efforts with Iran. These moves have angered Saudi Arabia to the point that Riyadh has rejected a much-coveted seat in the United Nations, which would have meant scaling down its jihadist support activities in Syria. That said, we are concerned at the potential for Saudi Arabia to meddle here, and to attempt to destabilize Lebanon from within and draw it further into the conflict in Syria.
Echoing this sentiment, Hezbollah's deputy speaker Naim Qassem said last week that the March 14 coalition was following orders of a Gulf state and obstructing the formation of the new Cabinet.
Onshore Lebanon
While the Levant Basin is an oil and gas bonanza, not to mention a geopolitical black hole, Lebanon is also looking onshore, but we don't expect this to be a lifeline for Lebanon-nothing comparable to the Levant Basin prospects.
The first week in October saw the start of seismic surveying in the Batroun region, where geologists think there may be sizable gas resources. The surveying is being done by British-based Spectrum, which is also doing the surveying in the Levant Basin. Phase one of the surveying will run until the first of November, with phase two carrying on in the Spring. It will be months, however, before we get any information from those surveys.
Bottom Line
A key facet of Lebanon's future political and economic independence will be energy, and the focal point of this will be the Levant Basin. This has the potential to bring massive investment to Lebanon, and not only to secure domestic energy needs both for industry and to stave off blackouts, but to turn Lebanon into a key exporter.
At present, Lebanon's oil and gas potential in the Levant Basin is being used for geopolitical posturing, but is also a crucial point of the domestic political debate. The inability to form a new government has left an incapacitated caretaker Cabinet in place, sidelining Lebanon's oil and gas potential. Never before have these resources been more critical.
Will there be a successful dialogue between political-sectarian rivals that could see the formation of a new Cabinet before the year's end? The current shape of the situation suggests this is not likely, but if we reach the end of the year without a new Cabinet, Lebanon will have a hard time recovering, politically and financially, and we will likely see international companies withdrawing from the Levant Basin bidding race. Lebanon might surprise us yet and dig itself out of this hole. It does have a reputation for being a country of miracles of sorts and reaching eleventh-hour consensus right before the lights go out.