I want to apologize for the last article I wrote. I have misinformed the public at large. I should have asked for more expert advice.
It turns out, drilling for offshore oil and gas on the shores of Lebanon is no given thing. It could be very expensive to produce (meaning that the State will find it hard to get revenues out of this venture).
this means that alternative means to get energy should be favored. And again in this case, Lebanon should acknowlege the fact that it is (and is in its interest to be) heavily depended on neighbors.
Now this is how the story goes:
At first, I talked to Roudi Baroudi a so-called energy expert who worked under Energy Minister Hmayed right before the extension of Lahoud’s term in Sept-Oct 2004. it seems that this team approached (or was approached) by an oil & gas company Schlumberger for consultation work – to prepare the ground for launching the bidding for parts of the offshore to drill.
I looked at the contract. They were getting huge amount of money for basically nothing. They were supposedly “updating” studies that were already done by seismic survey companies, and some irrelevant things.
So much so that the advisers of then Energy Minister Sehnaoui did not pursue the deal any further (although they did not stop it), by not paying Shlumberger. Sehnaoui’s adviser Raoul Nehme told me that “As soon as we came to the ministry, the Shlumberger had simply disappeared.”
And after looking at the contract Nehme told me that they were not approved by the council of ministers.
so there you go, although I stopped “looking for the truth” on this one I am sure that something smells fishy. Anyway, Nehme’s team favored completing the gas pipeline that links Syria to Lebanon, and tried to find means to respond to EDl’s huge affordable energy needs.
Things get clearer if you read what comes next:
These are the comments made by PFC energy expert Yahya Sadowski:
If any oil company thought there were “commercial” (i.e., cost effective) concentrations of natural gas in Lebanon, they would be offering to do the survey work themselves. That people expect the government of Lebanon to pay the costs suggests that they think discoveries are unlikely. Of course, if the Lebanese government conducts a survey and discovers reserves, it can demand a better price for exploration blocks than it would be able to command without a survey. But only IF it makes confirmed discoveries.
People who advocate that the government of Lebanon pay for a 3D survey up front, I suspect, do so for several reasons: a) they have an economic or political interest in not having Lebanon rely upon gas imports from the regional grid; b) they know very little about the geology of natural gas; and c) they may be getting a lucrative retainer from one of the companies that is offering to do the survey and/or advise the Lebanese government. I guess there is a fourth reason that might be in play: they might be Lebanese and therefore excessively optimistic, confident–despite a lack of indications–that Lebanon is sitting atop massive quantities of shallow, cheaply produced gas.
Just to give you one more thing to think about: the Saudis and the Iraqis produce massive quantities of gas as a byproduct of their oil production. Both have traditionally “flared” (burnt) this gas off as if it was a worthless byproduct. Now that the Qataris and Iranians are pioneering gas exports from the Gulf (both using the expensive LNG process, which allows them to market in Asia without the need for pipelines), Baghdad and Riyadh are starting to think about how they might put their product into a regional gas grid. Both are able to produce gas far more cheaply than Lebanon could under any imaginable circumstances. Why would it be in Lebanon’s interest to produce its own expensive gas rather than to import cheaper product from Iraq, Syria, Egypt, or Saudi Arabia?
And this is the first e-mail I got from Prof. Sadowski:
I read one of your recent pieces about oil and I would urge a little caution. Rudy Baroudi is one of the most corrupt officials to ever be associated with EDL, and I think it flatters him to call him an “expert in privatization.” (He privatizes public funds into his private pocket.) He is correct that there is natural gas, and probably oil too, within Lebanon’s territorial waters. It is not surprising: there is natural gas almost anywhere you dig in the Middle East, there is actually a vast regional surplus. The real question is whether the gas can be produced and marketed profitably. Most gas deposits are too small and scattered to be worth producing at current prices. And a big part of this problem has to do with transportation and marketing: gas is much more expensive to transport than oil, since it requires either liquification or special pressurized pipelines. This only becomes cost effective when you have a contract with a large, long-term consumer like Turkey.
In the 1990s Egypt encouraged oil and gas exploration by offering the oil companies “put or pay” contracts to drill the Delta and offshore. Lots of gas was discovered. But Egypt is losing money on the deal. It uses some of the gas domestically, but it has never found a secure buyer–and the terms of the contract require the government of Egypt to buy any of the gas that cannot be sold. (Egypt, like Iran and Iraq, had hoped that Turkey would buy its gas. But Turkey’s economy performed too irregularly to be an effective customer.)
It is a shame that the government of Lebanon doesn’t have any honest experts in energy issues who might steer them away from this type of scam.