Border dispute will not prevent oil excavation

Report says production unlikely this decade

The dispute with Israel over maritime borders is unlikely to prevent the Government from going ahead with the development of its offshore gas potential, Citigroup said in its Middle East monthly report. The Cabinet recently approved new conditions for international oil companies to bid for gas exploitation rights. The area involved in the first exploitation tender, scheduled to kick off during February, lies entirely within the country's exclusive economic zone.

The report mapped out two scenarios regarding prospects for the exploitation of offshore hydrocarbon reserves. The positive scenario assumes the successful exploitation of offshore resources, which would trigger a major transformation in the country's economic outlook: “Successful exploitation would particularly benefit the electricity sector, public finances and the external sector.” However, despite this cheerful outlook, the government's timetable for starting commercial extraction by 2017 rmains unrealistic. The actual extraction phase is unlikely to start before 2020, mainly due to the divisive politics and traditional institutional bickering.

The negative scenario, on the other hand, assumes that major delays would push back the timeline for the exploitation of offshore resources well beyond previous predictions. It suggests that such risks would prevent Lebanon from reaping the benefits of its natural resources. This dim outlook was attributed to divisions in domestic politics as well as geopolitical instability in the region.

This scenario assumes the complex procedure for setting off oil explorations would face major difficulties given the local political dysfunction. Decisions concerning the parameters for the tendering process, bids assessment, contracts' terms and awards, and the use of proceeds - among others - need to be made at each stage in order to allow the process to move forward.