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    Lebanon's New Government Carries New Hopes for the Energy Industry



A government was formed after 10 months of deadlock. A dispute over the energy ministry led to neither March 8 nor March 14 parties receiving the portfolio.

by: Karen Ayat

Posted in:

East Med Focus

Lebanon's New Government Carries New Hopes for the Energy Industry

A new government was formed in Lebanon after ten months of deadlock. National political rivalries and the consequences of the Syrian conflict next-door had prevented the political vacuum from being filled. The severe delay in forming a government with executive powers has caused several postponements in the launching of the country’s first licensing round. The most recent date to open the bidding round was set by previous minister of energy Gebran Bassil for April 2014.

Prime Minister Tammam had been unable to form a government due to severe confrontations between the March 8 party (known as the Christian Free Patriotic Movement (FPM) and its Hezbollah ally) and the March 14 alliance led by the Sunni Future Party. The latest dispute revolved around who would hold the energy portfolio. Minister Gebran Bassil from the March 8 party, previous minister of energy, is now minister of foreign affairs and Arthur Nazarian from the FPM-aligned Tashnag, a small Armenian party is the new minister of energy.

The ministry of energy gained in attractiveness since estimates suggested that large amounts of natural gas could be hidden under Lebanon’s seabed. According to the Ministry of Energy, estimates based on recent seismic surveys covering 45% of Lebanese waters indicate that as much as 96 tcf of gas reserves and 865 million barrels of oil reserves could constitute Lebanon’s hydrocarbon wealth. A recent report by Bank Audi stated that according to the Ministry's sources, such amounts would translate into USD 600 billion to the Lebanese government based on current oil and gas prices, or ten times the size of the country's public debt1

In his speech, new Prime Minister Tammam Salam expressed his hope that the new government would allow presidential elections to be held before the expiration of the current president Michel Suleiman's mandate in May and that parliamentary polls would follow. Lebanon was recently the victim of severe security concerns. The rising violence and the ongoing conflict next-door created an environment of instability and fear. The massive influx of Syrian refugees also caused the economic situation to worsen.

Energy remains at the core of Lebanon's priorities. Two essential decrees are yet pending and their issuance is essential for the country to conduct its bidding round. The new government now has the power to issue the pending pieces of legislation to demarcate the 10 maritime blocks and establish a revenue-sharing model. A holistic approach needs to be adopted by the government through collaboration and dialogue between the various ministries in order to achieve an environment of peace and stability essential for the prosperity of the energy industry. The spirit of the new government is to achieve the national interest of the country and there is no doubt that a lot of work has to be done.

1- The full Bank Audi's report is accessible via this link http://research.banqueaudi.com/documents/EconomicReports/lebanon_economic_report.pdf

Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.  Email Karen on ayat_karen@hotmail.com. Follow her on Twitter: @karenayat