Reforms before development
on 12/3/2019

The Lebanese financial model is on the verge of collapse, and the country’s leaders have shown little willingness to acknowledge the seriousness of this crisis, never mind address it in a comprehensive manner. Instead, they have repeatedly invoked supposed future proceeds from the oil and gas sector as a savior that would instill confidence, jumpstart the economy and lift Lebanon out of the compounding crisis.

These are false premises. Given the seriousness of this crisis, and in order to maintain the interest of the Lebanese people who have called for accountability and an end to mismanagement and corruption in the streets over the past 45 days, LOGI and Kulluna Irada recommend the following:


No development of the oil and gas sector beyond current commitments

LOGI and Kulluna Irada recommend no further development of the oil and gas sector beyond current commitments until stringent economic and financial reforms are carried out. 

It is of the utmost importance that Lebanon does not move forward with oil and gas exploration, beyond the two drills in bock 4 and block 9 that it has already committed to, under the current unstable financial situation.  

It cannot be an option to tap into non-renewable assets that belong to future generations in order to pay back the country’s debt and make up for the immense misallocation of resources  that has led Lebanon to its current situation. Instead, efforts should be made to develop a comprehensive strategy that sets Lebanon on a path towards sustainable restructuring of its debt and finances. 

Before that takes place, Lebanon risks squandering any potential future proceeds from the sector on unproductive uses, rather than investing them in the future of the country. 


Immediately enact anti-corruption measures

Officials must immediately enact anti-corruption measures, such as publicly revealing the real owners behind all companies subcontracted in the oil and gas sector.

Total, the lead company in a consortium that will drill in Lebanon’s waters next year, is currently holding tenders for 25 contracts for services and infrastructure works to accompany the exploratory phase. 

Officials must ensure that all of the real owners of the companies that win those contracts be made public, in accordance with the Law on Strengthening Transparency in the Petroleum Sector (article 10.7)

 LOGI and Kulluna Irada call for utmost transparency in the tender process itself. This means that the tender documents and the names of all entities that submitted their tenders need to be published. Detailed results of the tender, such as who won, who didn’t, and why, all need to be made public.

At the same time, the detailed bank statement of the account holding the revenues so far from the initial phases of this sector’s development, including the sale of seismic data, must be made public.


Recognize the sector is not the magic remedy to Lebanon’s problems.

Even if Lebanon makes a commercially viable hydrocarbons discovery early next year, revenues from the sector would not begin to show until about a decade later. This is one of the main reasons the oil and gas sector cannot be the magic remedy to the economic and financial crisis Lebanon is witnessing today. 

The fact that all of the country’s top officials have referenced this sector as a potential solution to Lebanon’s crises shows that they are either uninformed, or they are intentionally misleading the public.  

Additionally, authorities  might think of using a commercially viable discovery to justify more debt, or to adopt an otherwise unsustainable approach towards spending. 

This is very dangerous, and is an example of what is known as the “pre-source curse” whereby countries overspend or overborrow based on natural resource revenues that aren’t yet proven. 

The world is littered with examples of nations that have gone down that path of borrowing and over-spending only to find that the eventual revenues were less than they thought or came much later than they predicted (Ghana, Mozambique). This is a recipe for another financial ruin that Lebanon should avoid.

Photo Source: Strategy&

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