Oil and Gas in Lebanon: Extract or do not Extract?
Abdallah K. Nassereddine
Faculty of Business Administration
Beirut Arab University
Beirut, Lebanon
a.nassereddine@bau.edu.lb
Abstract—There is a widespread belief in Lebanon that
hydrocarbons extraction can bring substantial benefits to the
economy and the standard of living of its citizens. Using
Computer Assisted Qualitative Data Analysis Software
(CAQDAS), NVivo10, six experts’ opinions are analyzed to
identify some crucial issues related to the conditions of achieving
potential gains in the hydrocarbon sector in Lebanon. Among the
four main principles of conditions of success, only transparency
seems to be at work at the moment. Governance is not
elaborated, accountability is far from achievable, and investment
strategies are not almost inexistent. Based on the above, it might
make sense to conclude that the benefits of oil and gas in
Lebanon are not certain under the current situation and the
cornerstones for the success of SWF are nonexistent so far. It
might be preferable that Lebanon improves those conditions
before it extracting its oil and gas. After all, the delay might turn
up to be beneficial rather than problematic.
Keywords—oil and gas; experts opinions; Lebanon; NVivo
I. INTRODUCTION
There is a widespread belief and aspirations in Lebanon,
among policy makers and citizens alike, that the hydrocarbons
extraction can bring substantial benefits to the Lebanon and
turn the standard of living its citizens to similar levels of those
countries of the Gulf Cooperation Council. This view is based
on the argument that all sectors can benefit directly from the
production of hydrocarbons and indirectly through investment
in the value chain of the industry that leads to sustainable
development, job creation, economic growth and long term
gains. Hydrocarbons, as thought, can bring a serious solution to
the public debt that reached USD 65.6 billion as of July 2014, a
debt-to-GDP ratio of nearly 140%.
However, even that the hydrocarbons could bring potential
gains to the Lebanese economy, still, the plain assumption of
increased wealth and economic prosperity due to hydrocarbon
resources is not that simplistic. The main argument of this note
is that prosperity won’t take place in vacuum and that several
conditions are crucial in order to achieve those potential gains.
Learning from Algeria, Nigeria, Morocco, Norway, the Gulf
Cooperation Council (GCC), Cyprus and others past
experience entail minimizing bureaucracy, developing local
skills, improving governance and transparency which are
foundations of success.
978-1-4799-8572-2/15/$31.00 ©2015 IEEE
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Mohamed Berjawi
Faculty of Business Administration
Beirut Arab University
Beirut, Lebanon
mb.berjawi@hotmail.com
II. METHODOLOGY
A. Experts Opinions
This study uses a qualitative research method, the expert
opinions method, to identify some crucial issues related to the
conditions of achieving potential gains in the hydrocarbon
sector in Lebanon. The conducted interviews for this research
are semi-structured and non-standardized. The use of semi-
structured interviews is most appropriate in this study, as the
interviewees are knowledgeable about the subject, and
therefore able to decide what was important to mention (A.
Bryman, 2008).
Before conducting the interviews, the existing literature
was critically analyzed and used to develop the questions. The
interview questions were divided into different categories
based on the potential gains and conditions of success
analyzed. During the interviews, the order of questions in the
interview guide was not strictly followed.
B. Interviewees
For the aim of this study, six well known Lebanese experts
in the field of economics and finance from both public and
private sectors, and which have no less than 10 year experience
were interviewed.
The list of participants includes:
1) Expert 1: Board Member- Petroleum Administration,
Lebanon.
2) Expert 2: Senior political analyst and a professor at a
leading university in Lebanon.
3) Expert 3: Associate Professor in Economics at a
leading university in Lebanon.
4) Expert 4: Legal Expert at the Lebanese Center for
Energy Conservation (LCEC).
5) Expert 5: Senior economic analyst and oil & gas expert
in a leading Lebanese newspaper.
6) Expert 6: Economic consultant for the Minister of
Finance in Lebanon.
C. Data Analysis
After conducting the interviews, they were transcribed for
qualitative content analysis. This step in the qualitative
research process typically consists of assigning descriptive tags
or codes to data (Alan Bryman & Bell, 2011). Computer
assisted qualitative data analysis software (CAQDAS) was
used and interviews were transcribed and the analysis of the
data was carried out with the assistance of the qualitative data
analysis software package NVivo 10. After the coding process,
nodes were grouped into sub-themes under higher themes
headings a shown in TABLE I. As such, 17 nodes were created
and then classified into the 5 sub-themes. The research
examined the 5 sub-themes and 17 codes individually and
explore if there are similarities and differences between
experts.
TABLE I. THEMES AND ACTIVITIES
Themes Sub-
Themes
Situation of delayed bidding license
oil and gas extraction before 2020
in Lebanon
Oil and Gas in Lebanon
will definitely reduce the debt to GDP ratio and this will also
improve the rating of Lebanon.
The implications of oil and gas in Lebanon are divided into
two parts: short term and long term implications. In the short
term, there will be an injection of cash in some industries
between $3 to 5bn all over the exploration period, which will
motivate the economy and valuate the currency. In the long
run, 10 or more years, Lebanon will start generating a profit
share from the oil and gas extracted.
Lebanon pays about $5bn in debt deficit, debt service and
electricity deficit every year. Lebanon can benefit from its gas
by powering its electricity that can save around $2bn every
year.
Code Exploration and production of oil by itself will be
beneficial for the Lebanese economy in terms of job creation
and profits for domestic enterprises serving the oil and gas
industry. As stated the hydrocarbons regulations and laws

Israel conflict impose on right holders and subcontractors to employ 80% of

Lebanon deficit and debt ratios qualified Lebanese personnel. Some experts argue that 6000 to
economy
the implications of oil and gas
7000 jobs will be added to the economy.
development , prosperity and jobs generation
C. Conditions of Success
Conditions resource curse
of success
Dutch disease
According to one expert, Lebanon is the worst country in
the world when it comes to public corruption related to the
weak institutions
government public finances. If politicians in the context of the
guideline
current political system are in charge of spending the oil and
Roles and Fund objectives gas proceeds, it is pretty sure that the benefits of oil and gas
Benefits Fund goals will be substantially diminished.
Sovereign Wealth Fund

policies, rules and procedures

Fund contribution to investment and economic
development
Conditions Santiago principles
of success accountability, transparency, governance, and
clear investment strategies
Fund management
III. RESULTS AND DISCUSSION
A. The Current Situation
The delay related to exploration and production agreement
is based on political grounds. Major economic decisions in
Lebanon are normally taken on a consensual basis between
several parties. The majority of the experts considered that
Lebanon will not be able to produce oil and gas before 2020
because if we start today we need 6 to 10 years for the
compilation of the drilling and the extraction.
B. Potential Gains
As it stands, the Lebanese economy is stuck in a vicious
cycle. The debt increases, servicing the debt increases further,
which increases the debt further. It is expected that the debt in
Lebanon will reach $100 billion by 2020. In light of this, the
oil and gas is one of the very few available options to break this
debt cycle. One solution is to enlarge the economy. Direct
revenues from oil and gas will help enlarge the economy this
Another expert argues that Lebanon is at no risk of the
Dutch disease, simply because Lebanon is a large receiver of
remittances, and also because the revenues from oil and gas
will not be flowing directly in one shot. Also, if implemented
properly, a SWF can have a positive effect in protecting the
economy against overheating.
According to one expert, Lebanon already faces a resource
curse of its own. The resource curse is remittances. If
remittances fall, the Lebanese economy faces financial
problems. This is similar to oil and gas in other countries. The
same expert believes that with oil and gas, the inflow of money
will be more diversified and this will avoid the resource curse.
When it comes to corruption, all experts agree that to
overcome the resource curse, Lebanon must implement an anti-
corruption strategy and good governance across public
institutions.
Another condition to benefit from oil and gas is to generate
equitable economic strategic plans (over 5 years) and create
social capital to the country. This includes infrastructure which
has a positive impact on tourism and other industries in
Lebanon.
D. SWF
According to the experts, the fund should not be seen as an
opportunity to spend but an opportunity to generate money. A
large sum of the fund should be allocated for upgrading the
current infrastructure and invest in better education.

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 An expert stated that oil proceeds should only partly go to
budgetary objectives and debt servicing. The other part should
be used for development. Some experts stated that the SWF in
Lebanon is following the Norwegian model which is one of the
best models in the world. However, the very well establishment
of the SWF is not well elaborated as yet.
E. Conditions of Success
According to experts, there is no obligation rule in Lebanon
to implement the Santiago principles. More importantly, all
experts argued that none of the Santiago principles of
accountability, transparency, governance, and clear investment
strategies hold today in Lebanon. Lebanon scores very poorly
in terms of accountability, transparency, governance, and there
isn’t any clear economic plan in the country. From that
perspective, they argued that Lebanon is not ready to exploit its
oil and gas resources. These will be wasted in the same way
other government proceeds are being wasted. Lebanon should
rather improve its governance system prior to the exploitation
of oil and gas. Another important recommendation of the
experts is that the SWF and PA must operate as totally
independent entities in the same way central banks operate. An
expert stated that even in absence of these principles, it’s better
to take what we can instead of waiting in vain for these
conditions to mature.
Some experts also claim that the SWF should not by any
mean used to pay back Lebanon’s public debt. It should be
used in long-term investments that generate revenues for future
generations.
Still, the main elements of SWF are not yet agreed on, and
the fund needs an oversight body consisting of people in the
industry rather than politicians.
According to an expert, there are two crucial issues to take
into consideration. These assets are converted from natural
resources to money and this is an irreversible process. This
money must be secured for the future generation, so a slope
must be put, it must be agreed on the principle of investments.
One expert also stated that the PA, the regulator in oil and
gas sector is working on some transparency initiative and some
indexing. He also claimed that the PA is starting new and
promoting this sector by putting a draft taxation laws into
place, and also building a transparent system in term of roles
and responsibilities.
The final results are presented in TABLE II
TABLE II. RESULTS SUMMARY
Oil and Gas in Lebanon
Situation of Lebanon extraction is delayed due to the lack of political
oil and gas in consensus and the non-approval of two decrees which are
Lebanon block delineation and the model agreements decrees.
Lebanon will not be able to produce oil and gas before
2020
There is no evidence as whether Israel is or is not stealing
from Lebanon Hydrocarbons resources.
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Lebanon The benefits of oil and gas on the Lebanese economy are
economy substantial and can be divided into short term and long
term but the current state of the institution and the high
level of debt to GDP ratio put those benefits at risk.
Lebanon can benefit from its gas by powering its
electricity that can save him around 2 billion dollars every
year
Conditions of There is no risk of Dutch disease in Lebanon.
success Lebanon is losing hydrocarbons market, and the crush in
price from 115 and 120 dollars to 50 or 48 dollars in 2015
will likely limit some operators company from exploring
Lebanon already faces a resource curse of its own. The
resource curse is remittances.
To overcome the resource curse. Lebanon have to
implement an anti-corruption strategies and good
governance all over the Lebanese administration.
Other condition to benefit from oil and gas is to generate
equitable economic strategic plans (over 5 years) and
create social capital to the country
Sovereign Wealth Fund
Roles and The main objective of Sovereign wealth fund is a mixture
Benefits of savings and development funds.
The fund should not be seen as an opportunity to spend
but an opportunity to generate money.
The SWF in Lebanon is following the Norwegian model
Conditions of There is no obligation rules in Lebanon to implement the
success Santiago principles.
None of the Santiago principles of accountability,
transparency, governance, and clear investment strategies
hold today in Lebanon.
The SWF should not by any mean used to pay back
Lebanon’s public debt. It should be used in long-term
investments that generates revenues for future generations
or Investment in infrastructure if possible.
In the time being there is no law for SWF and this should
be at a certain time some debate for the politician.
Lebanon is not ready to exploit its oil and gas resources.
IV. CONCLUSION
All in all, it appears from this study that the consensual
nature of the Lebanese political system is the major reason
behind the delay. We can also conclude that Lebanon won’t be
able to gain from its hydrocarbons in the short term and it
might take 8 to 10 years to reach extraction.
In addition, this study concludes that the benefits of oil and
gas on the Lebanese economy are substantial but the current
state of the institutions and the high level of debt to GDP ratio
put those benefits at risk.
When it comes to SWF, this study concludes that the SWF
is still under elaboration and is following the Norwegian
model. Among the four main principles of conditions of
success of SWF, only transparency seems to be at work at the
moment. Governance is not elaborated and accountability is far
from achievable if there is political interference. Investment
strategies are not well elaborated. Based on the above, it might
make sense to conclude that the benefits of oil and gas in
Lebanon are not certain under the current situation and the
cornerstones for the success of SWF are nonexistent so far. It
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