The Mediterranean is crystal clear, a great day for a dive. The spewing sewage has been successfully diverted to the newly linked up treatment plants. Water and Electricity is being supplied 24/7 and fibre optics have reached the last house in Akkar. Thanks to the newly implemented educational program which is fully aligned with the local job market, unemployment is down to 5 %. All Lebanese have universal health coverage and all can apply for affordable housing. Public efficient transport is no longer a wish but a reality, linking North to South and East to West. More importantly, today is the start of the Senate hearings to evaluate the activities of the ministry of electricity for 2025.
A Lebanese dream.
This is what the Lebanese have been fighting for on the streets, since October 17, 2019.
As long as we have Kleptocrats in power, TOTAL should refrain from drilling and handing vital future cash flow to an undeserving administration, one that has stripped #Lebanon of all its assets and mortgaged its future.
Like delusionary addicted lotto gamblers, the current ruling ‘elite’ are pinning people’s hopes, dreams and expectations on the uncertain prospects of Oil and Gas reserves. This ruling ‘elite’ is a Cartel of Kleptocrats or Kleptos that is taking the country to certain total ruin and the people for fools, once again, by promising them “economic independence” by ways of a gamble on future riches, certainly to be looted if found.
The drilling of wells is soon. It might disprove the seismic studies and prove the wells dry or in the best-case scenario confirm them as wet (a 7% chance of success) according to Richmond Energy Partners. Even if proven that the oil/gas is there, it could not even be commercially 1 viable and if viable, it will take 7-10 years to be in the money!
Although no one in their right mind should loan the Kleptos, especially after a 30-year tenure and massive fiasco, the socio-economic meltdown being witnessed today would be a walk in the park compared to what will ensue if they manage to leverage the oil futures. Any loans on their watch will certainly bury our children in debt for eons to come.
Would 30 years of corruption by the ruling Kleptocrats just vanish instantaneously or more likely increase if this discovery is made? Would not a positive discovery entrench the ruling Cartel even further? Today, and even with no proof of oil/gas, they are still not willing to step aside. The risk is high, as there is evidence that ‘Mafia’ like activity will only but increase with any discovery, as it did with the Sicilian Mafia and Sulphur. So, what would shield Lebanon from an increase in the looting of its public’s wealth? Do we trust the Kleptos’ incompetent and corrupt track record to enable Lebanon to use the potential of the oil/gas’ wealth to boost its economy?
There is evidence that discovery alone increases the risk of conflicts, so we must be wary and tread carefully.
Is the tug of war between the Kleptos being witnessed today, in the government formation, a reflection of yet another fight for a share of revenue in the spoils of the oil/gas? Is there a larger geo-political game being played at our expense by the greater powers? Are the current and future regional wars related to the oil/gas? No doubt that oil/gas must be a driver.
Israel started exporting gas to Egypt under a $19 billion contract, Lebanon could have signed. What would be the worst of two evils: moving ahead with drilling while the #Kleptocrats are in power, or suspending exploration until reforms are implemented?
Let us assume that a discovery is made and it is economically viable to proceed while we ignore the above mentioned risks.
This scenario is in no way a home run. We have no defined markets to sell to yet, and no distribution networks. We could be hit with the ‘Dutch disease’ (although not likely with the weak pound at this stage), and suffer from cost/revenue volatility. And perhaps by the time production is underway fossil fuels could be leapfrogged by more sustainable and cheaper alternatives.
Shouldn’t our goal be to emulate Norway or should we settle and remain at the level of Venezuela? We have sunk so l ow already. The Kleptos nearly defaulted on UN arrears. The only difference i s that Venezuela has been an oil producer since 2014, whereas Lebanon only has some seismic data to date.
The differences between the success of Norway and the failure of Venezuela (besides values and culture) have to do with the quality of governance and strengths of their respective institutions. Quantitative tests reveal that oil-rich nations who have more public oversight and public protests provide better water and sanitation services than oil-rich nations who do not experience such dissent.
Lebanon is a corrupt country already and the likelihood of it ever becoming a ‘Norway’ is remote… Unless we reform (and change culture).
Therefore, the important question is: should Total proceed with the drilling for exploration before proper governance reforms are implemented, as per the EPA (Exploration and Production Agreements) it signed on the two blocks 4 and 9 and as part of the Consortium (with ENI and Novatek)?
Lebanon is no doubt a late comer to the industry, and our discussions moot as we might have already missed the boat. Israel has already started exporting gas to Egypt as of 15/1/2020. Irrespective of this, the question remains what would be the worst of two evils: moving ahead with the drilling with the Kleptocrats in power, or suspending exploration until reforms are implemented?
We need to recognize that those contracts were signed prior to Oct. 17, 2019, the day the Lebanese rose to the streets. What happened before that date is now from a distant era, public scrutiny and expectations of accountability are much higher and today Lebanon is in a better place, thanks to the mobilization of the civil society.
Having said this, our institutional frameworks are weak, and corrupt, and we could already be set up for failure. Even the resigned caretaker Prime Minister and the current President have both acknowledged the extent of rampant corruption. Although transparency and accountability measures are being promoted thanks to the hard work of NGOs, some prerequisite reforms 6 have yet to see the light -- enactment of beneficial ownership, subcontract and petroleum registry laws, vision for the Sovereign Wealth Fund and others.
More importantly structural and deeper reforms need to be implemented prior to any drilling or exploration, if they are not, it could mean business as usual for the Kleptos. Pre-conditions of a truly “Clean Government’, independent judiciary and the enactment of full Transparency and Accountability reforms set by the People of Lebanon (and GIS and CEDRE donor countries) are a must (re. to the Industry incl. Beneficial Ownership, & Subcontract laws, petroleum registry, etc.).
Although the EPAs cover the whole supply chain from exploration to production, Total still needs Cabinet approval to proceed from exploration to production phase. If the Kleptos remain in power, Total would surely get the go ahead to phase two. Why take any unnecessary risks? Therefore, pressure on Total is needed to suspend exploration, until pre-conditions are met. If Total does not suspend, it could be complicit in aiding and abetting the Cartel (as we cannot ensure proper governance yet), regardless of its self-enforced stringent proper governance measures.
Kleptocrats are corrupt members of government that use their power to exploit the people and natural resources of a territory in order to extend their personal wealth: The curse of gas in corrupt #Lebanon and the need of a Technocrats government.
We need to be ready; we need to walk before we run.
If this discovery is made, a clear overall vision for the industry is still needed even prior to production, including the pros and cons of establishing a Lebanese national gas company and for the SWF.
The ‘enclave effect’ is yet another risk to be mitigated. We must set a vision for the country and fold the oil/gas into it.
An overall socio-economic value-based vision for Lebanon (ala Singapore model or ala Norway welfare state model?) should be evolved a priori, and ensure diversification into other sources of national revenue (industry, services, etc…). This is especially key, knowing that the oil/gas industry is generous in salaries and could crowd out human capital from other industries. Focus on pushing for higher standards for education, based on meritocracy should not be neglected as this is a strong competitive advantage we should build upon. Emulating Singapore, for example, as an offshore hub could reverse the brain drain and put a stop-loss to exporting talent and off-spring.
Since 1965, Singapore has focused on shipbuilding, electronics, banking while providing social services like housing and health care, tied to the shared values of its different ethnic and religious groups.
The flip side to the above envisioned Lebanese dream is for the current ruling Kleptocrats, like a lotto player winning the lucky ticket, to spend the oil/gas proceeds, if any, with no real plan. Spending sprees on mansions in London, Paris and Monte Carlo, yachts and private jets and on large delegate trips to NYC are their legendary habits that we Lebanese are all too familiar with. These moneys will never ever be recovered.
The dream will turn into a nightmare, one we are all already living today, but one most definitely amplified by the ‘Recourse Curse’.
A true Lebanese nightmare.
And so today, the Lebanese people must decide: to drill or not to drill, that is the question.