July 24, 2014
Governing the Oil and Gas Sector

The Lebanese Center for Policy Studies (LCPS) and the Lebanese Petroleum Administration (LPA), in collaboration with the International Development Research Centre (IDRC), organized a two-day workshop entitled “Governing the Oil and Gas Sector” to discuss the challenges and opportunities brought forth by the potential discovery of oil and gas reserves in Lebanon. The aim of the workshop was twofold: the first was to present and discuss the first drafts of six policy papers, commissioned to experts and scholars, that highlight the challenges and opportunities in the fields of institutional structures, domestic energy needs, gas export options, macroeconomic implications of revenues, revenue management and geological features of the Levant basin. The second aim was to identify additional challenges that LCPS and LPA could address going forward. The workshop, which was attended by government officials, experts, scholars, and civil society members, took place on June 19-20, 2014 at Gefinor Rotana Hotel, Beirut, Lebanon.
 
Following introductions by Mr. Sami Atallah, Executive Director of LCPS, Mr. Nasser Hoteit, President of the Board and Head of Technical and Engineering Department of LPA, and Ms. Roula El-Rifai, Senior Program Specialist at IDRC, the workshop was divided into the following seven sessions:
 
Session one: Dr. Reinoud Leenders, Professor of Politics at Kings College London and LCPS Research Fellow presented his paper entitled Spoils of Oil? Assessing and Mitigating the Risks of Corruption in Lebanon’s Emerging Offshore Petroleum Sector. Leenders discusses in his paper ways of developing an institutional framework that ensures transparency along the entire value chain of the oil and gas sector. The paper aims to assess the risks of corruption, identify the institutional and regulatory measures and policy tools put into place thus far and their robustness, as well as inform the corresponding debate. Mr. Mohamed Alem, Managing Partner at Alem & Associates and Member of LCPS Board, was the moderator of this session while Mr. Farouk Al-Kasim, President of Petroteam A.S., was the discussant.
 
Session two: Dr. Leila Dagher, Assistant Professor of Economics at the American University of Beirut, presented her paper entitled What is Lebanon’s Domestic Energy Demand? Dagher looks at Lebanon's domestic energy consumption and sets out to estimate Lebanon's potential domestic demand for Natural Gas (NG) during the next decade and a half by examining the potential growth of NG demand in four sectors: power/energy, residential and commercial, transportation and petrochemical. Dagher also discusses the advantages of switching to NG in all these sectors as NG is cheaper, more efficient, longer-lasting and more environmentally friendly than other fossil fuels. Dr. Bassam Fattouh, Director of the Oxford Institute for Energy Studies and LCPS Research Fellow, moderated the session while Mr. Joseph Al-Assad, Energy Consultant at the Ministry of Energy and Water, discussed the paper.
 
Session three: Dr. Bassam Fattouh, Director of the Oxford Institute for Energy Studies and LCPS Research Fellow, presented his paper entitled Lebanon's Gas Trading Options, co-authored with Laura El-Katiri, Research Fellow at the Oxford Institute for Energy Studies. In the paper, the authors discuss Lebanon's potential gas export and import options going forward. The paper examines the advantages of importing natural gas during the rest of this decade in order to prepare and shift the Lebanese economy towards energy produced by gas before the commencement of domestic production. Fattouh and El-Katiri also tackle Lebanon’s various export options, stressing on its highly time-sensitive nature. The session was moderated by Mr. Walid Nasr, Member of the Board and Head of Strategic Planning Department of LPA while the paper was discussed by Dr. Walid Khadduri, Consultant at the Middle East Economic Survey.
 
Session four: Dr. Ata Elias, Professor of Geology at the American University of Beirut presented his paper entitled What is the Size of the East Mediterranean Hydrocarbon Basin? Elias discusses the geological features and potential resources of the Levantine basin in general and the Lebanese offshore areas in particular. He also pinpoints the challenges in estimating the size of the petroleum reserves because of their deep water environment and the complex geological formations of the basin. Dr. Talal Hassoun, Lecturer at the Department of Chemical Engineering at the American University of Beirut was the moderator while Mr. Wissam Chbat, Member of the Board and Head of Geology and Geophysics Department of LPA, was the discussant.
 
Session five: Dr. Jad Chaaban, Associate Professor of Economics at the American University of Beirut and LCPS Research Fellow, presented his paper entitled Macroeconomic Implications of Windfall Oil and Gas Revenues in Lebanon: Dutch Disease and Optimal Policy Adjustments, co-authored with Jana Harb, Researcher at LCPS. The paper raises concerns about the realization of a Dutch disease episode within the Lebanese economy following the development of potential oil and gas reserves discovered off the coast of Lebanon. The authors investigate the likely impacts of a resource boom on the economy in light of the economic performance and fiscal policy regime in Lebanon in recent decades. The session was moderated by Mr. Shadi Karam, Advisor to the Prime Minister, Presidency of the Council of Ministers, while the paper was discussed by Dr. Adeel Malik, Professor of Economics at the University of Oxford.
 
Session six: Dr. Bassam Fattouh presented his second paper entitled Managing Oil & Gas Revenues: The Case of Lebanon and co-authored with Lavan Mahadeva, Research Fellow at the Oxford Institute for Energy Studies. The paper highlights some of the major characteristics of the Lebanese economy and discusses the various ways in which it could manage the expected oil and gas revenues by referring to successful international practices. The authors argue that the Lebanese macroeconomic conditions and present institutional setup are fraught with weaknesses that require serious reform. They then identify a number of possible revenue management options the country can adopt including but not limited to paying off the public debt, making direct cash transfers, and investing in infrastructure. Dr. Mounir Rached, Advisor to the Minister of Finance, Ministry of Finance, was the moderator of the session while Ms. Sarah Bou Atmeh, Petroleum Management and Taxation Consultant at the Ministry of Finance, was the discussant.
 
Session seven: the workshop concluded in a Moving Forward session where Mr. Sami Atallah, Mr. Farouk Al Kasim, Dr. Adeel Malik, Dr. Bassam Fattouh, Mr. Nasser Hoteit and Dr. Kamal Hamdan, Managing Director of the Consultation and Research Institute, discussed the important issues needed to develop Lebanon's oil and gas sector and better prepare it for the extraction process. These included the need for continual dialogue between the government and citizens, matching needed skills with the Lebanese job market, improving the vocational and technical education sector, improving infrastructure, and understanding the political economy of the sector, among others. The experts also highlighted key topics to be further studied such as the creation of a sovereign wealth fund, investments in public infrastructure, direct cash transfers, employment and education in the local content, role of parliament and the consultation process, risks to the environment, and land-use.