Fiscal deficit at $2.6 billion
Lebanon’s Ministry of Finance has stated that the fiscal deficit widened to $2.6 billion in the first 11 months of 2009 — 25.1 percent of the 2009 budget. Standard Chartered Bank forecasts that the total budget deficit for this year will reach 9.5 percent of the economy, the highest in the Middle East and North Africa and the second highest in emerging markets. The Economist Intelligence Unit forecasts the deficit to constitute 10.3 percent of gross domestic product in 2010. Government expenditure came in at $10.3 billion, a 15.5 percent year-on-year increase in the first 11 months of 2009. Debt servicing — the payment of interest on the public debt — also increased to $3.4 billion, making up a third of total expenditures. Revenues over the first 11 months of 2009 also rose to $7.7 billion (21.9 percent), mostly from taxes, which accounted for a total of $5.5 billion. A further $1.68 billion came from customs revenues over the same period, constituting a year-on-year rise of 72.9 percent. Some 87 percent of total customs receipts were processed through the Port of Beirut.
Noble signs LOI to supply Israel with contentious gas
The American oil company Noble Energy closed last year by signing a letter of intent (LOI) to provide Israel with natural gas from a field off the country’s northern coast. The Tamar field, located some 90 kilometers offshore of Haifa, was discovered by Noble Energy in January 2009. Experts have stated that the field could potentially reach into Lebanese territorial waters, meaning that any extraction without Beirut’s consent would constitute an effective filch of Lebanese gas. The field can potentially produce up to $750 million worth of natural gas annually, and be extracted over a 15-year period, according to Noble, although some analysts have disputed this figure.
The agreement signed between Noble and Israel will provide gas to state-owned Israel Electric. “The progress on both the development and marketing of Tamar continues to move us along towards first production in 2012, consistent with our original projections,” said Charles D. Davidson, Noble Energy’s chairman and chief executive officer. According to Noble, the company has signed LOIs totaling $10.5 billion to provide gas from the Tamar field.
Istithmar chief resigns
dubai World, the ailing Dubai government-owned holding company at the center of Dubai’s debt debacle, has replaced the head of its flagship private equity investment company Istithmar World. David Jackson submitted his resignation on January 20 and was replaced by Istithmar’s former Chief Investment Officer Andy Watson, a former director at Barclays Capital.
The resignation comes as Dubai World struggles to restructure some $22 billion in debt. The company has also signaled an end to its previously aggressive buying spree, which had targeted acquisitions such as a $942.3 million purchase of luxury retailer Barneys New York, Manhattan’s W Hotel and a stake in Las Vegas’ $11 billion CityCenter development.
“Today, Istithmar World is focused on the steady-state management of existing assets to maximize value, rather than on private equity investment,” said a statement issued to Bloomberg by Dubai World’s Chief Restructuring Officer Aidan Birkett. EFG-Hermes investment bank, in its “2010 United Arab Emirates Yearbook” (released last month), has estimated that the Dubai government has racked up debts “in the range of $130 billion to $170 billion.”
Lebanon set for steady seven
A recent report issued by the World Bank entitled “Global Economic Prospects in 2010” stated that Lebanon’s economy would grow by 7 percent, the same rate as the organization predicted it would in 2009. The World Bank attributed this steady growth forecast to several factors, including the effects of economic links to other nations being lower than expected during the global downturn, a steady flow of remittances at around $7 billion, and double-digit growth in foreign direct investment.
The World Bank also based its forecast on the assumption that, since Lebanon was able to register growth during periods of instability — such as those experienced in 2009 in the run-up and aftermath of the Parliamentary elections — then these economic vectors would continue into 2010 as the effects of the global downturn diminish.
Evidence supporting this theory includes recent figures released by Lebanon’s Ministry of Tourism, which stated that the number of tourists visiting the country officially reached an all-time high. Throughout the course of last year, some 1.85 million tourists visited Lebanon, constituting a 39 percent year-on-year increase, shattering the previous record of 1.4 million tourists set in 1974. The Ministry of Tourism also estimated that income from tourism in 2009 was around $7 billion, with the largest proportion of visitors coming from Arab countries (42.5 percent) followed by Europe (24.5 percent), Asia (14.3 percent), the Americas (12.3 percent), Oceania (3.5 percent) and Africa (2.3 percent). The largest number of visitors from a single country (223,793) came from Jordan.
Shell boosts Egypt investment
Shell Egypt has received approval from the Egyptian authorities to buy a 40 percent stake in the Alam El Shawish oil and gas concession. The stake will come from the current co-owners, the government-owned GDF Suez and privately-owned Vegas Oil and Gas, with each offering up 20 percent of their shares in the concession. According to Reuters, Vegas will hold onto a 35 percent stake and GDF Suez will maintain ownership of the remaining 25 percent.
According to CI Capital, a New York-based investment firm, Shell Egypt already produces 100,000 barrels of oil from the 15 discoveries they have made in Egypt’s Western Desert. The Western Desert holds 35 percent of Egypt’s crude oil, according to CI Capital.
Calm oil prices expected in 2010
Crude oil prices are expected to remain stable in 2010 after two years of market fluctuations brought on by the global economic downturn. Barrel prices are expected to remain around the $80 mark, according to the global consultancy firm Control Risks, which accurately predicted oil prices in 2009. “We called the price at $70 for 2009, which people said was crazy at the time, but which turned out to be pretty much on tap,” said Jonathan Wood, global issues analyst at Control Risks. According to Wood, the upper and lower limits for crude prices over the course of the year will be $100 and $60, respectively, but predicted that this would be improbable. Echoing this sentiment, last month the International Energy Agency (IEA) also announced that it sees demand for oil increasing by 1.4 million barrels per day in 2010, spurred by demand in China and other parts of Asia. The IEA also expects production of natural gas liquids in the Organization of Petroleum Exporting Countries (OPEC) member states to increase by 885,000 barrels per day (bpd) to 5.7 million bpd, with non-OPEC production rising only by 200,000 bpd to reach 51.5 million bpd.
