Drilling for Hope

What makes the oil industry so diverse, and how is it specifically developing in Lebanon?

Access to secure and reliable sources of energy is critical for the economic development of Lebanon and for triggering economic competitiveness in other productive sectors. Across the value chain of petroleum activities, the development of the prospective hydrocarbon resources will require capital-intensive investments that will have direct and indirect impacts on the Lebanese economy and society. In the short term, petroleum activities will trigger demand for goods and services in the oil and non-oil economy, while in the longer term the resulting revenues will be placed in a sovereign wealth fund and be invested and/or saved, depending on the law that defines the strategy of the fund. Beyond the direct financial returns, the prospective resources could transform Lebanon into an energy-independent country, thus reducing the fiscal burden of the energy import bill. Several impacts could result from access to indigenous petroleum resources, such as ripple effects across several sectors of the Lebanese economy, creating added value, and increasing purchasing power and competitiveness. In Lebanon the local market is capable of monetizing the prospective gas resources, as the electricity sector will be the first off-taker of natural gas. The medium industrial hubs, including energy-intensive industries, could also benefit from access to indigenous petroleum resources. In the longer term, the transport sector could also benefit from natural gas resources. Regarding employment, Lebanese legislation includes provisions for local content emphasizing employment, training, and procurement. With regard to employment and training, the provisions stipulate that at least 80% of employees must be Lebanese nationals. This target is to be reached gradually and could be subject of exemptions if justified, especially in the early phases of development of the sector. Regarding procurement, preferential treatment will be given for the procurement of Lebanese-originating goods and services exists, provided such goods and services are internationally competitive with respect to quality, availability, price, and performance.

How do you deal with the challenge of renewable energy to the gas industry?

We do not perceive the inclusion of renewable energy sources as a challenge in the energy mix. With the climate change convention, Lebanon seeks to reduce greenhouse gas emissions by using renewable energy and conventional sources of energy that are less polluting. Lebanon is committed to the Paris Agreement in its intention to reduce greenhouse gas emissions by 12% by 2020, as an unconditional target, and by 30% by 2030 as a conditional one. Lebanon is close to achieving the 12% target in terms of total demand for electricity and heating. However, few countries are able to generate power solely relying on renewable energy sources because of cost, access to finance, storage, availability of suitable land, reliability, and security of uninterrupted supply, to name but a few. To cover the power demand gap, we need a reliable source of energy such as natural gas, which is cheaper and less polluting than heavy fuel oil, gasoline, and others that are currently being imported. The inclusion of prospective indigenous natural gas to the energy mix in Lebanon represents a transitional energy that is relatively cleaner and cheaper compared to existing sources of imported heavy fuels. Lebanon is planning to gradually increase its utilization of natural gas in the energy mix, and there are plans to gasify the economy early on through the import of liquefied natural gas (LNG), especially since most operating and new power plants can also run on natural gas.

How will the potential wells affect Lebanon’s economy?

It is already a positive indicator for the Lebanese economy to be able to attract renowned major international oil companies willing to take the full investment risk and work in Lebanon. Lebanon has the potential to find hydrocarbon resources, as the geological setup and legislative environment are conducive to oil and gas investments. Nevertheless, the oil and gas sector is by nature a high-risk industry in technical, economic, and geopolitical terms.