Lebanese to rake in billions of liras from....oil?
Lebanon’s net proceeds from gas extraction could easily exceed $600 billion, which is more than enough to contain public debt and stimulate the economy, Bank Audi said.“
Based on the current gas and oil prices and on the basis of Lebanon’s 96 trillion cubic feet of gas reserves and 865 million barrels of oil reserves, net proceeds to the government are estimated at more than $600 billion according to Ministry of Energy sources,” Audi said in its report on the overall performance of the Lebanese economy in 2013.
The Britain-based company Spectrum Co. estimates the gas reserves in an area of just 3,000 square kilometers off the southern coast at 25 trillion cubic feet based on 3-D seismic surveys carried out last year.
However, difference among Lebanon’s political parties and the deadlock over forming a new Cabinet have brought the process of gas extraction to standstill, with caretaker Energy and Water Minister Gebran Bassil postponing the first gas licensing round until April 10.
Despite this third delay of the auction, Bank Audi expresses optimism for the long-term prospects of the gas and oil industry.
“In a longer run, beyond current temporary setbacks, Lebanon’s long-term outlook bodes favorable on the overall. As the extraction of oil and gas from its territories will start to materialize, it can move the country from one state to a completely different one,” the report said.
It added that such potential revenues, which total 10 times the current public debt of $63.5 billion, “demonstrate the importance of containing and minimizing the cost of delays in an economy that enjoys a huge structural potential.”
“If Lebanon succeeds [at] such a challenge, the extraction of natural resources can put an end to the country’s most significant postwar conundrum, which is public finances, while growth could turn into sustainably strong levels for a number of years, rapidly expanding output levels and income per capita at large,” the report said.
The promise of future revenues from oil and gas extraction comes as Lebanon continues to struggle economically due to the regional turmoil and political paralysis.
“The year 2013 has extended Lebanon’s economic sluggishness witnessed since the beginning of the regional turmoil. A continuing economic slowdown is being reported within the context of the adverse spillover effects of the Syrian conflict on investment, tourism and foreign trade,” the report said.
“Real GDP has displayed a low, though positive growth for the third consecutive year, estimated at between 1.5 percent and 2.5 percent by the IMF and the Central Bank of Lebanon.”
But Bank Audi believes that Lebanon’s GDP in 2014 will be slightly better than 2013.
“According to the simple average of growth rates forecasted by nine foreign institutions that estimate and forecast Lebanon’s GDP, the average real GDP growth rate is likely to slightly improve from 1.1 percent in 2013 to 2.1 percent in 2014.”