Jan 14, 2018

Three interconnected developments that occurred in December 2017 will have a lasting impact on Lebanon. The Lebanese government made two long overdue decisions: launching the energy exploration process and setting the parliamentary elections date for next May. The third development is a breakthrough that has regional implications: a United Nations-sponsored meeting was held between Lebanon and Israel to discuss for the first time the demarcation of their maritime border, an official Lebanese source told Al-Monitor.

After years of tensions and delay, the Lebanese government had agreed in January 2017 on a formula to divide the offshore oil and gas blocks along the Lebanese coast on a political, geographical and sectarian basis. The winning bidder of the first licensing round was a consortium of France’s Total, Italy’s ENI and Russia’s Novatek. Their bid was confined to two blocks only, including block 9 in south Lebanon near Israel’s Exclusive Economic Zone. Official sources in Lebanon told Al-Monitor that the exploration and production agreement between the Lebanese government and the consortium will be signed at the end of January, whereas exploration is expected to begin in mid-2019 and production in 2021-22.

The smooth flow of oil production can only be ensured by two factors: maintaining the minimal agreement among Lebanese leaders and maintaining the current rules of engagement between Hezbollah and Israel.

On the domestic level, the energy process will largely depend in the foreseeable future on the dynamics between President Michel Aoun and parliament Speaker Nabih Berri. Aoun aims to keep the oil and gas exploration process in the Energy Ministry, which has been under the influence of his political movement since 2009, while Berri seeks to establish alternative institutions that allow him to exert control over the process.

The next parliament, with a term that expires once the energy exploration concludes in 2022, will have to debate and vote on establishing a sovereign fund to preserve and invest the surplus revenues of oil and gas production. The exploration process’ financial dimension is currently led by a small unit in the Finance Ministry, while the energy minister, advised by a multi-confessional Petroleum Authority, handles the technical side. Moving forward, Lebanese politics is not expected to have an impact on the exploration process, at least until production starts.