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How Block 9 could save the Lebanese economy

Generating electricity using gas instead of fuel would cut down the country’s high energy bills

Gulf News

Damascus: Lebanon’s long overdue decision, to drill for oil and gas reserves in an offshore water area, has sparked escalating tensions between Beirut and Tel Aviv, threatening, yet again, another military confrontation between the two countries.

Israel falsely claims that part of the triangular water area, known as Block 9, is theirs.

Lebanon has insisted it would carry on with the drilling despite Israeli threats.

In mid-February, US Secretary of State Rex Tillerson travelled to Lebanon, hoping to defuse tension by peddling a 2012 demarcation line originally put forth by senior US diplomat Fred C. Hoff.

It gave Israel one third of the disputed 860 square kilometres of water in the triangular zone, leaving Lebanon with 550 square kilometres only.

Parliament Speaker Nabih Berri snapped that the “Hoff Line” was “unacceptable” while Hezbollah chief Hasan Nasrallah called on all Lebanese to reject the US proposal, saying: “This is a battle for all of Lebanon.”

Speaking to Gulf News, prominent Lebanese journalist Sarkis Abouzeid said: “Lebanon will carry on with the drilling” regardless of what the Israelis say or do, due to several factors, “primarily of which is a united position between (all sectors and parties) within Lebanese officialdom” and secondly, a united position between the army and the resistance (reference to Hezbollah).”

The former director of news at Al Jadeed Television added: “Israel is now trying to steal what it can snatch, wrongly thinking that Lebanon is weak and divided. A united position strengthens Lebanon in any negotiations or confrontation.” Meanwhile, Commander of the Lebanese Armed Forces, General Joseph Aoun underlined, “categorical rejection of the Israeli enemy’s sovereignty of Lebanon and its sacred right to invest all its economic resources.”

Some Lebanese lawmakers have advised taking the matter to the International Court, but to do that, Lebanon needs a proper demarcation of the waterline — which requires full Israeli cooperation.

So far, the Israelis have been anything but cooperative.

In mid-February, Energy Minister Yuval Steinitz said: “Don’t provoke us and don’t explore or even get close to the disputed line-of-contact.”

Defence Minister Avigdor Lieberman went a step further, threatening a “full-scale” invasion, should drilling on Block 9 start, calling the act “very provocative.” Block 9, he added, “is by all accounts ours.”

On 29 January 2018, three big oil firms were granted the rights to drill for oil and gas in Lebanon, being France’s Total, Italy’s Eni SpA, and Russia’s Novatek.

Total, which has 40 per cent stake in consortium, says that it won’t be digging in the contested area but 25-km away from it — not enough to sooth Lebanese and Israeli fears, it seems, or to give either of them assurances that they won’t be attacked if they take any action.

A long overdue affair, the drilling should have started ten years ago but was delayed and put on-hold due to non-stop gripping tension that resulted from aftershocks of former Prime Minister Rafik Al Hariri’s 2005 assassination.

Politics aside, however, Lebanon is in dire need of the lucrative revenue that the discovery of oil and gas would provide, which throw Lebanon’s debt-ridden economy a critical lifeline.

According to Mona Sukkarieh, a prominent political risk consultant and co-founder of Middle East Strategic Perspectives, “Seismic surveys have showed very promising results, but only drilling can confirm the presence of hydrocarbon resources in commercial quantities.”

Speaking to Gulf News, the ranking oil and gas expert said that the first wells are planned for 2019, and for them to have a significant impact on the country, they must first contain commercial discoveries.

“For this wealth to be a game changer” she noted, “their positive impact should be felt beyond this sector, by reviving other sectors in the economy and services, and improving socioeconomic conditions. This doesn’t happen randomly. It requires broader economic vision for the country. In principle, the government is currently working on one with the help of McKinsey.”

Sukkarieh notes that development of the oil and gas sector, once and if the discoveries are made and confirmed in commercial quantities, “the first market for any gas is the Lebanese market. The objective is to increase the share of gas in our energy mix. Gas has a lower carbon footprint and is also less expensive.”

Generating electricity using gas instead of fuel would cut down our heavy energy bill, which reaches 35 per cent in certain energy-intensive industries such as plastics, glass, and ceramics, by “roughly by $1.5 to 2 billion USD/year, depending on prices.” That in return would improve the competitiveness of Lebanese products, “and if we are able to export (and we might need to because the local market might be too small to justify large-scale infrastructure investments, this would represent additional revenue to the Lebanese economy.

Currently, Lebanon relies almost entirely on imports to meet its energy demand, a major cause of concern for a country that has one of the highest ratios of public debt to GDP in the world.”

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