“OIL AND GAS “TRANSPARENCY”
Yes, and it still is mysteriously hidden from us. Where is that "transparency" that we were all dreaming of and that our leadership had promised to adopt? Where is that "OPENNESS" that has been recommended by all the local and the foreign experts in that domain?
Instead, our Energy Ministers Gebran Bassil and now Arthur Nazarian are vying with each other to keep the cloud of secrecy over this all important subject.
Oil and Gas, gentlemen, are not your personal turf, nor is it the turf of your fellow politicians only. Oil and gas belong to the PEOPLE OF LEBANON, to the five million citizens who live in this country.
It is high time that you GENUINELY explain the whole story to us. Tell us the truth. Is it only our role to pay up, at the end of every year, some five to seven billions of dollars in budgetary losses, without explanations and protests?
Should we not hold you, and your other colleagues in the Ministry responsible and accountable for every cent lost and unexplained?
We insist that you hold a press conference, as soon as possible, and clearly explain about this entire OIL and GAS drama? Why things have not moved in that domain during the past four years?
We are the laughing stock of the international community, and you know it perfectly well.
Israel and Cyprus are miles ahead of us in that field. The Cypriots, whom we were disdaining in the past, have proven to be our masters in terms of transparency and governance.
Shame on you, for keeping us in the dark so long. This matter is not simply vital for our economy, but it may be our last chance to keep the country together and avoid bankruptcy.
SPEAK TO US. Tell us what is going wrong and who is holding that sector hostage? ENOUGH SECRECY!
FOR THE ATTENTION OF THE MINISTER OF ENERGY, HE ARTHUR NAZARIAN
Your Excellency,
In September 2005, that is nearly NINE YEARS ago, an oil and gas expert and a regional energy and privatization consultant, Mr. Rudi Baroudi, wrote a very pertinent article in the "Lebanon Opportunities" magazine that is reproduced below.
I think that the article speaks for itself, don't you?
What the citizens want to know is very simple: "What is going on?" Why nothing has been done during the past ten years in the Oil and gas sector, and when can we expect something concrete to be undertaken? But, more so, when will the Ministry of Energy provide us with some explanation about this mysterious wall of silence over this vital subject?
The question that we all ask is: "DO WE HAVE TO WAIT ANOTHER NINE YEARS TO DO SOMETHING, OR WILL SOMEBODY MOVE TO RESCUE THIS COUNTRY OF OURS BEFORE IT IS TOO LATE?
Breaking the energy impasse
By Rudi Baroudi, Regional energy and privatization consultant
The energy sector, like so many others, is in need of reform. In the words of the government, though, the lack of political consensus makes any progress on reform near impossible. The efficiency of the energy sector remains hanging in the balance, and the consequences are far-reaching with stability and a financially viable industrial sector among those at risk.The energy sector of today is plagued not only by endless borrowing from the Treasury but also by hikes in crude oil prices which have almost doubled since 1999. Although the sector has been slated since 1996, serious lapses in governance and mismanagement on the macroeconomic level have led to the current unsatisfactory environment. Meanwhile due to its growing energy economy, the nation is consuming more electricity and importing more petroleum products. The country's dependency on energy imports is constantly increasing.
THE PUSH FOR REFORM
Reforms proposed by the World Bank in 1996, for which a project loan was granted, as well as recommendations made at Paris I and II have all failed to materialize in the competitive structure and development of the energy market. he recommendations were deemed necessary to create a favorable climate to attract international financial organizations,provide private sector finance,allow tariffs to be lowered, promote efficiency, serve the population, and address renewable energy choices.Since the middle 1990s,the World Bank has continued to make a number of primary recommendations.These are to assist the government in disseminating knowledge, strengthening the capacity of the electricity and petroleum sectors, formulating sound investment, easing public finance, proposing energy diversification, promoting increased efficiency in the medium to long term,increasing the financial viability of Lebanion's national utility (EDL), improving fiscal policies, providing transparent and fair eneergy prices, and enhancing GDP growth. While enormous progress has been made, no serious follow-up has ever taken place.
WHAT COULD HAVE BEEN DONE
In Lebanon, in the absence of a united government policy, and despite the Higher Privatization Council's massive preparatory work, the government has so far failed to open the sector up according to best international practices. This could have been done and should still be done, by privatizing EDL, (pending decree since 2001), contracting out its management (pending decree since 2002), nominating a regulator (pending decree since 2001),and later gradually issuing a series of public offerings with different percentages. This last step, which has been done successfully in Europe, could yield an estimated US$2 billion in income for the Lebanese Treasury. All of these measures are badly needed to undertake the development of this sector efficiently. Without a clear policy mandate, Lebanon will still be far from converging toward clear European Union norms and standards, and will continue to struggle with the sector's structural weaknesses.
Since 1999 the government has remained active on certain key issues. Electricity tariffs have remained below cost, EDL's chronic financial imbalance has festered the risk of petroleum price instability and commodity hedging exposure have been ignored, as has capacity building. In addition, Lebanon's synchronization with regional electricity connection standards to Syria, Turkey (via the Ataturk Dam), Jordan, Egypt, Libya, and Iraq has been delayed as has the third phase of the Euro-Mashreq gas pipeline that will subsequently be integrated into the Turkish networks, with access to the European Union markets.
OVERCOMING THE CHALLENGES
All of these unprecedented obstacles have to be resolved in parallel with the deregulation of the sector. Any strategy to unlock this part of the economy should consider the benefits of wholesale electricity and gas offerings from regional markets once Lebanon's Energy market is ready and open for free trade. In this respect, Lebanon's energy policy should consider interfacing with the EU and Medtierranean's member states'energy networks. If no remedy is given in a macro context, this will undermine the creditworthiness of Lebanon with the IMF, FEMIP,the World Bank,and the European Commission.
Over the next 10 years, Lebanon's energy intensive economy will need to confront a number of difficult challenges beyond those of its restructuring and privatization commitments and the interdependencies between the two. Unlocking the energy economy through a broad political consensus with a ratified government intergrated plan should provide competitive energy prices, ensure security of supply,provide financial decisions,increase employment, implement strategic technologies,develop market and regional market mechanisms,select choice of fuel for power plants, accelerate the gas and oil exploration program, and open up acreage for licensing. Although Lebanon is located in a hydrocarbon rich area, any energy sector policy has to look farther toward a national and regional strategy to secure our energy supply and to open up to free trade in electricity and natural gas markets with physical links to MEDA countries.
WHAT NEEDS TO BE DONE
There is no doubt that important infrastructure investments are require for the electricity, oil, and gas industries to maximize their potential contribution to the Treasur and to meet Lebanon's electricity, natural gas, and petroleum products supplies. On the other hand, local action on energy efficiency, promoting solar, bio-fuel, wind hydro-power energy saving programs, and other renewables to protect the environment should also be part of any mainstream energy policy. If no measures are taken immediately on Lebanon's vital reform s, (within the judicial, institutional, and legislative framework, as well as ona technical and operational level, the energy crisis could hit allthe sectors of the economy.
LOOKING FORWARD TO A NEW ORDER
The prevailing circumstances such as the change of five different governments in the last few years and the contnuous change of policy makers and their policy gaps have all affected the sector's evolution. However the political conditions after the assassination of the late prime minister Rafik Hariri should engender important democratic, economic, and judiciary reforms by the end of 2005 or early 2006. This should unleash entrepreneurial action with regard to the deregulation development of this sector and eventually encourage the badly needed international institutions such as the EIB and the IMF to triggerimmediate rescue operations and provide Lebanon with financial assistance. In addition to the above recommendations, our country 's complex energy economic policy needs to be planned and implemented away from political feuding and intervention if we are to break the energy impasse and if Lebanon is to qualify for Europe's energy Free Trade AREA by 2010. A comprehensive coalition of political and economic forces iis required to extinguish the prevalent poisonous atmosphere and to combat corruption while setting about prioritizing the implementation of these policy clusters according tothe Nation's macroeconomic objectives.
During this period of transition, there should be a strategy of involving development agencies to assist in Lebanon's market evolution beyond this decade and to contribute to strengthening the country's socio-economic growth, fighting poverty, and arresting the energy profligacy.
