Lebanon's Energy Minister Welcomes US as a 'Real Player'
Author: Andrew Parasiliti Posted October 1, 2012
In an interview with Al-Monitor, Gebran Bassil, Lebanon's minister of energy and water, said he welcomes US involvement in the emerging energy opportunities in Lebanon and hopes the US will decide to become a "real player" in the Eastern Mediterranean.
Seismic surveys off Lebanon's southern coast suggest discoveries of up to 12 trillion cubic feet of natural gas.
Bassil, 42, who is in Washington to meet with US Undersecretary of State for Political Affairs Wendy Sherman and other US officials, told Al-Monitor's Andrew Parasiliti that American companies are already among those who have invested in the discoveries by acquiring data. He expected that the tender process would begin by year's end. Bassil described the offshore gas discoveries in the Eastern Mediterranean region as a force for stability, rather than friction, among Lebanon and its neighbors. He said that Lebanon and the Eastern Mediterranean could provide an energy alternative beyond the Gulf region.
He also described a role for Lebanon in the export and refining of Iraqi oil, saying that "the easiest, the fastest, as it exists right now, and the real window for the Iraqi oil is through that [Iraq-Lebanon oil] pipeline." Asked about the management of the expected resources from the discoveries into an economic development plan, Bassil said this is already being planned per Lebanese law and that Lebanon will establish a "sovereign fund to keep the revenues for the future generations."
(Note: Crest Investment Co., the principal investor in Al-Monitor, also invests in the region, including in the energy sector.)
The full interview ... (To see other Al-Monitor newsmaker interviews, click here.)
Al-Monitor: You said last week that none of the southern sector being surveyed falls in the 850-square-kilometer disputed area between Lebanon and Israel. Can you affirm again today that this is indeed the case? What else have you learned about the discovery?
Bassil: Sorry, but this is not precisely what I said. I was talking that there is an estimation of 12 trillion cubic feet in a certain area ... without specifying exactly where it was, and I said that this is an example of some of the discoveries that we might have. And it was to mention that we are not limited in our reserves on one location; rather, we have so many prospects in the South and the North deep water, shallow water, so obviously the more and more we work and we analyze and present the data that we have we are getting positive results. ...
Al-Monitor: Tenders were expected six months ago, but have been held up because of delays in the establishment of the government oversight committee. In light of the complex Lebanese politics, what steps are being taken to assure that the tenders have a level of transparency to assure best international practices and attract the best companies? What will be your parameters and guidelines for companies seeking to apply for tenders?
Bassil: You know it is true that we are a little bit late on launching the bidding rounds but we did not waste the time that we lost without getting more use of the data that we are having and this saves times from the exploration, the reconnaissance, phases. So all in all we are not losing time, we are being late on simply officially declaring the start of the bidding rounds. Now what gives guarantees for any investor is what we already have in the law, a law that is adopted by the parliament. And it has enough, it gives enough security to the IOCs.
First of all, first of all, any decision taken should pass through three different levels for governance. I mean you have to start first with the PA, then with the minister and finally with the council of ministers. So no one party, no one person can take a decision at that level, and this gives security because you know in a country like Lebanon where you will need consensus for, it may take some time; yes, this is Lebanese politics, but at least you can make sure that the decision will be right.
Second, by law we have to have a transparent bidding process, and you have to open it to everybody with a prequalification process, then shortlisting, then enough time for applying then for negotiations. And that decision would have to go through technical terms first before it goes to the council of ministers. So also by law we cannot launch the process without all these phases.
Third, also by law, any company participating will have to be in a joint venture of at least three international companies with one operator so this gives more guarantees for the IOCs and for the state of Lebanon. ... We have also the regulations that are already set and I think all the bidders, all the interested participants, have shown interest and are quite confident about, they feel safe about what has been decided until now. So we believe we are on the right track. And all the 26 companies who have already bought data are telling us that, yes, your process is good, we are fine until now, we want to be part of this operation, and they are waiting for us.
Al-Monitor: So what is the expected time that the tender process will begin?
Bassil: Frankly, this is kind of internal politics in Lebanon. If you want to put it in a timeframe that is logical, that is feasible, I would say before the end of 2012.
Al-Monitor: You mentioned 26 companies. What type of companies have expressed interest? American companies?
Bassil: Not only expressing interest, investing by acquiring the data, they already showed their money and 26 companies on top of them are the American companies. The US was the first state from which companies have bought data. The top five US companies are already working with us.
Al-Monitor: What about European, Russian, Asian companies?
Bassil: Also ... mainly the big companies, Russian, Chinese, Europeans. Most of them, the big ones, are already there.
Al-Monitor: The revenues expected to flow from such a sizeable discovery should have a substantial positive impact on Lebanon’s debt and chronic energy shortages. What steps are being taken to assure that the development of these resources is assimilated into a strong economic development plan?
Bassil: Again, it’s the law. Whereby and this is what delayed the law for quite a few months, now in the law we have to have a sovereign fund to keep the revenues for the future generations. Whereby we are not allowed by the law to use these funds in any internal simple auditing or financial manner. I.e. we have to invest and the revenues coming out of the investments, part of those can be used for serving the debt on one side or for investing into public projects. I believe this way we can ensure that the revenues are well kept for future generations and we can use part of them to recover economically and to invest for what is needed in our public projects.
Al-Monitor: Do you see the development of these resources as a source of friction with Israel and the other bordering countries where there are discoveries, or perhaps a source of potential cooperation among the countries where there are discoveries?
Bassil: I would not say friction nor cooperation, I would rather use the term of obliged stability, forced stability. By the interest of each side to use to the maximum the resources that he has. At the end, whether it is obliged, forced, or imposed, it is stability that we need. I don’t believe, as some parties would like to show, that this may be a source of tension. I don’t believe so. You know equilibrium of forces creates stability by itself. We are now in a situation where in terms of force ... or in terms of resources, we are at a level of equilibrium that by itself imposes stability. No one has interests, and especially the Israelis, to create a disturbance at that level because no one in that part of the Levant is allowed to produce gas without the other.
Al-Monitor: A related question; in light of the expansion of Iraqi oil production, are there any discussions of activating the oil pipelines between Iraq and Tripoli? This would require not only Iraqi cooperation, but Syrian cooperation. How do you see this developing, given what’s happening in Syria?
Bassil: This is a strategic project for Lebanon and for the region and this gives many alternatives for different parties to benefit from the huge reserves in Iraq that were kept for the last 10 years away from enough exploitation. So I believe that yes the easiest, the fastest, as it exists right now, and the real window for the Iraqi oil is through that pipeline which can open also the door for so many investors, not only to transit that oil. It’s not a transit operation it can be refined, it can be channeled to other pipelines in the region and for us as Lebanese it can serve as a real feed for our internal use.
You know what’s happening in Syria right now may look for the short term as hindering that possibility, and you know the Syrians were advanced on that level and maybe they paid the price for it. That’s why we have now a real possibility once things get calmer in the region in Syria, to work on that project again. And here is where countries like the US should really reconsider their policy.
Al-Monitor: In this context, what are the plans for the Tripoli oil refinery? Would this be part of this expansion?
Bassil: Of course. Lebanon had the best, regardless of what the refinement sector now is going through, where the volatility of the oil market makes it less, less attractive. You know companies tend now to go more toward storage. But you know at the end you need to do that refining process and you need to expand the capacity of refinement in that part of the world especially, and Lebanon has the best position. And also we have the law for that purpose that is already ratified, we have the land we have the infrastructure, whether land or marine infrastructure. So all we need is rehabilitate the plant and even the pipeline we have it. … its three pipelines, and one of them is still intact.
Al-Monitor: You mentioned US policy. You are meeting today I know with Undersecretary of State Wendy Sherman and I assume other senior US officials. What is the US position toward the discoveries, and some of the other policies that you mentioned? You mentioned that the US should change its policy regarding Iraq and the pipeline issues. What’s on your agenda for discussion with the US and what are your expectations for these meetings?
Bassil: It’s a new opportunity in that region for the US. It is on top of what they are doing in the Gulf area, another place where the profitability of the project is good and sizeable, and the conditions of the country can be on their side. So I don’t think it’s wise anymore to focus only on the Gulf countries. You have good chances on our country and it’s up to the US to decide if they will be a real player or they will watch from outside.
We are inviting them. Part of our visit here, of our lecture tomorrow in Georgetown is to encourage them, to tell them, "You are welcome to be part of that play." And I think they have the possibilities. Any position different than that, of taking into consideration other countries that may not be very happy for Lebanon to have that possibility, would not be helpful because we have the intention the will and the determination to go all the way for the exploration and the production of oil reserves. So this will happen anyway, no matter if some countries in the region are not happy about it, but this will happen. And I think so many countries as I told you, from every side, have the interest to have this going on in Lebanon.
Al-Monitor: What about matters related to maritime delineation in the region?
Bassil: We have a clear position that we want to preserve our resources but under the international laws. We don’t [want] to aggress anybody and we don’t accept to being aggressed by anyone. So whatever the international laws and principals dictate in that sense we are ready to accept it.
Andrew Parasiliti is CEO and editor-at-large of Al-Monitor.
Read More: http://www.al-monitor.com/pulse/originals/2012/al-monitor/lebanons-energy-minister-welcome.html
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