Beer, wine & arakBusiness

It’s all in the grape

by Nabila Rahhal
written by Nabila Rahhal

This article is part of an Executive special report on beer, wine and arak. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.

September was a busy month for Lebanon. From the Bekaa Valley to the hills of Batroun, from the mountains of the Chouf to Jezzine in the South, vineyards were abuzz with those harvesting grapes for this year’s wine vintages.

Wine making in Lebanon is enjoying a steady growth, with over 30 new wineries launched since 2000. This rapid growth and recognition at both the local and international levels — as many wineries export more than they distribute locally — has not been struggle-free for Lebanon’s wine producers and while this expansion is certainly welcome, it also presents risks.

A brief background

Wine production is part of Lebanon’s history, with many believing that Qana in South Lebanon is the setting of Jesus’ first miracle when he is said to have turned water into wine. Before the time of Christ, the Phoenicians traded wine across the Mediterranean and some parts of Europe. When the region fell under Ottoman rule, however, winemaking was forbidden except for religious purposes in monasteries. The sector was revived to some extent with the French Mandate over Lebanon, which brought with it the French’s demand for wine and their eye for quality land which could produce it, only to have the sector decline again with the onset of the Civil War in 1975.

Chateau St. Thomas

Chateau St. Thomas

Emerging from the war and with local production at a near standstill, the five existing wineries (Château Ksara, Domaine des Tourelles, Château Musar, Château Kefraya and Château Nakad) began putting back together the pieces of their businesses. Zafer Chaoui, chairman and CEO of Ksara and current head of the Union Vinicole du Liban (UVL), recounts how Château Ksara struggled in the first few years after the war as it was in a location in the Bekaa which was still considered dangerous, and because the new board had not had the time to properly invest in the winery itself after having bought it from Jesuit priests shortly before the war. The first order of business, recalls Chaoui, was to invest in new modern equipment and high quality grapes imported from France.

The Birth of the UVL and its role in selling Lebanese wine abroad 

The structure of the wine sector improved in the 1990s with the establishment of seven new wineries and the creation of the UVL in 1997. “The idea for the UVL was to concentrate our efforts and cooperate with each other. Actually, at the beginning of the UVL’s life, we had the mission to negotiate with the government to protect our common interests but we didn’t have any common view on marketing,” notes Chaoui.

Some wine producers see the benefits of UVL membership as providing a platform for them to meet with fellow wine producers and raise issues of common interests, such as taxation, so that they don’t operate in isolation. This aside, common marketing rapidly became a main goal for the UVL after their experiences at international wine exhibitions convinced them that wines branded and unified in one pavilion under one country, such as Spanish wine or Argentine wine, had more impact than individual wineries.

“We were looking at this through a long term lens. We are there to market Lebanon’s name as a wine producing country. Once this is achieved, it becomes up to each individual winery to sell, depending on its quality. Many consumers abroad had not even heard of Lebanon so first we needed to take care of that in order to create a snowball effect,” says Faouzi Issa, co-owner and winemaker at Domaine des Tourelles, explaining the idea behind “Wines of Lebanon,” the brand name the UVL gave to their Lebanese wine promotional campaigns in the global market.

[pullquote]The younger generation, says Touma, is slowly becoming more aware and adventurous in selecting wine from the different Lebanese wineries[/pullquote]

Today, despite Lebanon producing only about 9 million bottles of wine annually in total — a drop in the ocean when compared with countries such as Greece, at more than 350 million bottles annually — it is becoming globally known. All the wineries Executive interviewed cited export markets in Europe, the United States or even Asia. “When we first started, people thought that there were only one or two wineries in Lebanon producing a certain type of wine. Now, they are more aware of the varieties of Lebanese wine,” says Joe Assad Touma, winemaker and co-owner at Château St. Thomas.

The challenge for Lebanese wine in the export market is to make the transition from Lebanese restaurants abroad into international venues and retailers. “Your export market starts with Lebanese restaurants, but the challenge is to get out of this niche market. The Lebanese expats are your first supporters,” says Aziz Wardy, general manager of Solifed, the company that produces Domaine Wardy.

The Lebanese wine boom captures the government’s interest 

The Lebanese wine sector has only truly blossomed in the last 10 years, with 23 new wineries marking their first vintage amid a growing local interest in wine. Wadih Riachi, manager of Vintage Wine Cellar, a well known wine retailer in Saifi Village, Beirut, says that, from his experience at Vintage, interest in wine in Lebanon has been growing at an annual rate of 5 percent for the past five years. Eventions, the company which organizes the annual wine festival Vinifest, recounts how when they first started in 2004 they had only nine participating wineries and attracted mainly the older generation, while today they have 30 participating wineries and 25,000 visitors of different age groups. 

Wineries have also noticed this growing local interest in wine, especially among the younger generation, which Touma says is slowly becoming more aware and adventurous in selecting wine from the different Lebanese wineries. However, more effort is still needed to discourage them from “sticking to only one wine which they know,” he notes.

Wardy agrees with Touma’s view and believes that tastings, wine tours, winery luncheons and local festivals such as Vinifest all help market Lebanese wine locally in an indirect way.

Chaoui attributes this growth in the local wine market to the competition among the now large number of wineries, which has encouraged the consumer to switch from heavy alcohol like arak or whiskey to wine. “Now we have a substantial increase in consumption per capita in Lebanon though we are still extremely far from the consumption in Europe and the US,” says Chaoui placing it at 5.6 million bottles annually between local and imported wine, i.e. less than 1.5 bottles per person.

Fueled by the efforts of the private sector, the wine industry gradually became one of the few that was performing well both locally and internationally and thus captured the interest and attention of the public sector, instead of the other way around. “We are supporting the winemaking sector because it is a highly qualified sector at the global level and because Lebanese winemakers have put in a lot of personal effort and investment to reach the required standards of quality,” says Louis Lahoud, the director general of the Ministry of Agriculture, adding that the governmental support is provided through the ministries of industry, economy and foreign affairs, each within its capacity, with “a main dynamo for action” which is the Ministry of Agriculture.

Domaine Wardy

Domaine Wardy

Lebanese wine days

The first act of support by the government was the organization of the “Lebanese Wine Day” event which took place at the George V Hotel in Paris in 2013, at the Ritz Carlton in Berlin this year and with plans for New York in 2015.

Chaoui explains that this event typically involves 300 to 400 key people — journalists, restaurant owners and distributors — who are selected from the ministries and the wine producers’ contacts because they have an interest in Lebanese wine and could help with marketing and distribution.

Aside from seeing his winery’s participation in the event as a duty to Lebanon, Sandro Saade, co-owner at Château Marsyas along with his brother Karim, sees the benefit of Lebanese Wine Day as creating a long term positive image for the country and also as a venue to target clients interested specifically in the Lebanese market. This differs from international wine exhibitions, where visitors are there for all wineries and may happen across a stand for Lebanese wine.

While all wine producers Executive interviewed agreed that government support for their sector, however limited, is appreciated and that all exposure to international markets is good, many feel Lebanese Wine Day has got off to a slow start. Some say that the event’s allocated budget could have been spent more efficiently to produce a more successful event, and others feel that the international exhibitions they attend have a more direct impact on their business in terms of marketing and sales. “If the budget was bigger, we could attract more media to promote the event, we could invite more people or have more than one event per year,” says Chaoui. Lahoud says that the ministry, through its consultations with the private sector, is working on improving the event each time.

The National Wine Institute

Perhaps the government’s most important backing for the wine sector will be through its role in the National Wine Institute (NWI), a regulatory body whose main duties include researching the Lebanese territories and national grape varieties in order to set quality standards, modelled after the French appellation d’origine contrôlée, a certification which indicates the origin, quality and general style of wine.

[pullquote]The NWI is off to a slow start and so far, says Lahoud, “Nothing tangible has been achieved”[/pullquote]

Without such an appellation, explains Saade, all Lebanese wine is currently placed at the same level regardless of its quality or origin which is unfair to those who are investing more time and money to produce a distinguished drink.

In order to designate these appellations, the NWI’s first step would be to identify the different terroirs, or vinicultural landscapes, in Lebanon and create a geographic certification database. “Where does wine of Lebanon come from? Does it come from the Bekaa, Batroun or Jezzine? It is important to identify all of this, as it gives Lebanese wine more credibility,” says Riachi. 

Saade explains that some winemakers produce wine in one region but bring grapes from another. “This is not wrong at all but the consumer has the right to know where the grapes they are drinking come from. The most important thing for us is that the consumer is informed,” he says. 

Because of the extremely high price of land, many of the bigger Lebanese wineries own the majority of their vineyards but acquire more land through long term rental contracts with farmers who work under the wineries’ conditions and also sometimes buy grapes, especially for their arak production, explains Domaine des Tourelles’ Issa. “The disadvantages of owning the vineyard are that there are more responsibilities, and more work which would require a bigger team, hence more expenses. The advantage is that you have more control over the vine’s yield as a lighter yield produces better quality wine but independent farmers would tend to add to a vine’s capacity to make more money selling more grapes,” says Nathalie Touma, co-owner at Château St. Thomas.

Although some like the Saade brothers feel that setting geographic certifications and appellations should be solely the government’s job — with limited consultation from the private sector, as “control should come from above and not within” — the NWI, which was formed last year, has four representatives from the various Lebanese wineries and four from the related ministries.

As is, the institute is off to a slow start and so far, says Lahoud: “Nothing tangible has been achieved.”

“We were slow starting off because there was no government at the time [the NWI was created] and so there were needed signatures missing and no approved budget, but hopefully we’re slowly moving forward now,” says Joe Assad Touma, who is also a member of the institute.

Domaine Wardy

Domaine Wardy

The future of Lebanese wine

Lebanese wineries have overcome many challenges, including marketing the country’s name abroad and continuing to produce wine in an unstable political climate where roads to the vineyards can sometimes close arbitrarily due to the political tension in the Bekaa region, home to many of the vineyards.

They have also put in major investments — the most commonly cited by the winemakers interviewed being land, electricity, marketing and imported items, essentially everything that goes into the bottle aside from the grapes — in a sector where returns are known to be slow due to the years it takes for the vines to mature and produce quality wine. 

Taking all this into consideration, it is no wonder Lebanese wine is expensive when compared to some other wines. “Already, the cheapest Lebanese wine bottle is more expensive than the Chilean or Argentine version,” says Wardy, explaining that land in these countries is cheaper and the equipment is available.

This is why what distinguishes Lebanese wine should be its quality and not the quantity produced, as quantity will not increase as long as land is limited and international markets are still relatively narrow. “All of Lebanon is a boutique winery and that should be our focus,” says Wardy.

Whatever the future focus of Lebanese wine, the fact is interest in this sector is rising considerably both locally and internationally and at the public and private level. After all, as Chaoui concludes, “Lebanese wine may be small in quantity, but it is one of the few products we have in this country which could be compared to the international level and you know, what could be more enjoyable than a good glass of wine?”

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Beer, wine & arakBusiness

Rising spirits

by Paul Cochrane
written by Paul Cochrane

This article is part of an Executive special report on beer, wine and arak. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.

There is general doom and gloom in the economy in Lebanon, consumer confidence is down and polls indicate general pessimism about the future. But one sector is doing surprisingly well given the current situation, or perhaps because of it: alcohol. Across the alcohol spectrum it is more, more and more. More importation choice, more wines, more breweries and more places to drink. As with many other consumer trends, this reflects global trends: drinking better and with greater variety.

A decade ago, there were three primary choices on the drinks table: blended whisky, Almaza beer, and red or white wine. Today, a good spread may feature in addition to the above: vodka, single malt whisky, rosé wine and locally produced craft beer. In many respects, the changes today reflect what the market went through in the 1960s, when arak — that beloved drink accompanying mezze on a lazy weekend — declined in popularity in favor of Scotch as taste buds started to change.

But the alcohol scene today is unlike anything the country has seen before. It has matured, and fast. While only three rosé wines were on offer at Vintage Wine Cellar several years ago, today there are 25. The same goes for single malt whiskies and the selection of international wines. Beer has equally diversified, with Brasserie Almaza offering five different beers, and two new local beers entering the market this year. Decadence has also become more muted as tastes have become more discerning. 

“The opulence of the last 10 years has ended, when people were popping Salmanazar (nine liter) and Jeroboam (three liter) bottles of champagne at nightclubs; people are showing off less,” says Nagi Morkos, managing partner at Hodema, a consultancy service. 

Instead, consumer behavior has diversified and moved upmarket. It has become about drinking a specific vodka in a cocktail, going for a single malt instead of a blended whisky and asking what local wines are on the menu. Consumer trends have also become associated with perceived calorie intake: less in vodka, more in whisky, which partly explains the spirit’s popularity in the nightlife scene.

Yet the ostentatious nightlife the capital has become renowned for has not disappeared. A distributor will still spend hundreds of thousands of dollars to have one of their vodka brands advertised at a leading rooftop club to gain attention locally, also knowing the broader impact of Beirut’s jet setting circles. 

The country’s certain global cache is reflected in its alcohol’s popularity abroad. With the domestic market as limited as the land for growing grapes, the country’s 40 vineyards are choosing to produce quality over quantity — which means export. Lebanese wine is now gracing the menus of Michelin starred restaurants in France, is being imbibed in New York and London and has been the vin de table for the Queen of England. 

When it comes to beer, Kassatly Chtaura named its new lager Beirut with the export market in mind, and 961 — named after the country’s calling code — exports to the US, Europe and Hong Kong. New craft beer brewery Colonel, just two months after opening, has already had inquiries from European importers. 

With another major commercial beer brewery planned, the craft brewing scene starting to flourish, awards being won at international wine festivals and more quality arak being distilled, Lebanon is truly going through an alcohol renaissance, despite what is happening in the immediate neighborhood.

Here’s to a glass of local wine, beer or arak. Kesak!

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CommentOil & gas 2014: On hold

Safety in numbers

by Laury Haytayan
written by Laury Haytayan

This article is part of Executive’s special report on the oil and gas sector. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.

 

In November 2013, then-Minister of Energy and Water Gebran Bassil was busily promoting optimism and working hard to launch the first offshore licensing round for oil and gas. And amid this feverish activity, fears of mismanagement, political and religious favoritism and theft of revenues from the resources were beginning to grow among the public.

But then things stopped. The government was unable or unwilling to pass the two essential decrees related to the maritime blocks and the model exploration and production contract. Momentum evaporated, leaving the licensing round in limbo, open for an undetermined amount of time.

It is speculated that the longer this period lasts, the more likely companies will lose interest or set their negotiations bar high, making the government pay the price for its inability to take decisions. But, on the other hand, it also gives the Lebanese the time to pause for a while and think of what it would mean for Lebanon to become a petroleum producing country, including what challenges and opportunities the commercial discoveries would entail. With Bassil heading the ministry, it looked like him running the 100 meters and us running behind him trying to catch up.

[pullquote]Lebanon is the perfect candidate to fail in managing the oil and gas sector[/pullquote]

Lebanon is not known for its strong institutions or its respect of the environment, nor for transparency and efficiency in public administration, its good management of finances, its diversified economy, or its planning and investment in sustainable development. To add to this grim situation, there is a high level of distrust between political parties themselves and between political elites and citizens. In a sense, Lebanon is the perfect candidate to fail in managing the oil and gas sector, thus turning these resources into a curse for the country and its population. And we all know that Lebanon cannot stand another curse.

However, there are remedies for the government to succeed in managing the sector in an efficient way. Having the political will to keep the sector away from local political bargaining and having a clear strategy and vision on how the revenues will be used are essential. There are also international changes in natural resource rhetoric on which the government and the citizens can rely to benefit from potential oil and gas revenues. The past few years have witnessed global campaigns for open data, open budgets and disclosure of and access to information, especially concerning natural resources. It is becoming more and more difficult for governments and companies to deny the right of the public to know how its money and resources are being managed. The Ministry of Energy and Water, and specifically the Lebanese Petroleum Administration (LPA), the regulatory body of the natural resource sector, had stressed on various occasions that it is abiding by the highest standards to ensure that the licensing process is transparent. It had chosen the prequalified companies according to a set of specified criteria; it intended to have a transparent process during the bidding round and had set clear selection criteria for the winners.

However, with regards to contract disclosure, the LPA was hesitant. It guaranteed that the model contracts would be published on its website, but announced a couple of times that the decision to publish the signed contracts had yet to be taken. On the other side, the LPA has been interested in one of the leading international initiatives on natural resource transparency — the Extractive Industries Transparency Initiative (EITI) — and it is looking into the feasibility of signing up to it. In a country such as Lebanon, with little trust among citizens and between the government and the public, initiatives such as the EITI could be a good start to initiate dialogue and debate for reforms and build trust over the management of the revenues.

[pullquote]It is possible to turn what now might be a curse into a blessing[/pullquote]

Lebanon is bound to become a producing country if commercially viable amounts of natural resources are discovered. Knowing its history in governance, there is great pressure on its citizens — and especially on civil society — to act as the safeguard of the sector and demand that the government put in place key accountability mechanisms, such as setting clear roles and responsibilities of agencies running the sector and information sharing mechanisms. The natural resources sector should become the medium for the government to show its good will in terms of integrity and corrupt-free management style to gain the trust of its citizens. Furthermore, the Lebanese population should work collectively to play the role of watchdog for the government’s policy decisions. And here, civil society’s role will be key. It is possible to turn what now might be a curse into a blessing that will finally put Lebanon on the right track to become a viable, strong and independent state.

So what is the EITI?

The EITI is an international initiative to improve transparency and accountability in the oil, gas and mining sectors. It was established in 2003, as a response to harsh criticism and a vast campaign from international organizations on opaque oil and gas management in resource rich countries with high poverty rates. The current EITI board is formed of 20 members representing implementing countries, supporting countries, civil society organizations, industry and investment companies and a secretariat, which is responsible for reaching out to countries with natural resources and supporting them to implement the EITI.

Countries decide voluntarily to sign up and must meet a number of requirements to obtain and preserve the status of compliance with the initiative. Currently 46 countries are using EITI to improve natural resource governance. Recently, the UK, France, Germany, Italy and Australia committed to implement it.

For countries implementing the EITI, natural resource companies are required to publish what they pay to governments and governments are required to publish what they receive. The mutually provided numbers are then reconciled by an independent auditor; any discrepancies are investigated and a report is produced. Participating countries in the EITI are required to disclose information on licenses and license allocations, in-kind revenues, transportation revenues, data production, social expenditures and sub national payments. It is also important to note that the EITI encourages contract and beneficial ownership disclosure, which identifies the real owners of the natural resource companies.

Each EITI implementing country forms a multi-stakeholder group (MSG) that includes representatives from the government, companies and oversight bodies — the latter mainly coming from civil society. Some MSGs also include parliamentarians. This group oversees the EITI process and the production of reports. It also ensures that the reports are disseminated to the public and discussions over reforms are launched. The findings of the produced report are communicated to the public to raise awareness and initiate debate about better management of the sector.

[pullquote]All this will eventually create pressure to make the government more accountable[/pullquote]

Benefits of the EITI

The EITI goes beyond producing a report that contains contextual information and production figures. It is a tool that requires collective action from different stakeholders in identifying the substantial information that needs to go into the report, which will be the bases for debate, discussion and advocacy around the management of the resources. Moreover, this voluntary initiative has benefits for governments, companies and civil society organizations.

A government will benefit by demonstrating a commitment to transparency that would improve its national and international reputation with both citizens and the international community. It also benefits a government by improving revenue collection and management processes — Nigeria was able to find $553 million in owed taxes in 2009 after using the EITI — as well as sovereign ratings.

Companies and investors benefit by mitigating political and reputational risks, and by strengthening the investment climate by addressing opaque governance and securing long term stability in extractive industries, where investments are capital intensive and dependent on long term stability to generate returns. Reducing such instability is beneficial for business, as is demonstrating corporate social responsibility (CSR) and contribution of payments to national development. Transparency of payments made to a government can also help to demonstrate the contribution that their investment makes to a country.

Civil society benefits by using the tremendous amount of information that will be available to the public through the publication of the reports. This information will empower civil society organizations to set advocacy plans, as well as help media outlets with reporting and investigating the numbers and data provided. All this will eventually create pressure to make the government more accountable. The rules of EITI require that civil society organizations be formally and fully involved in each stage of the initiative. This gives them a voice in a permanent consultation and participation framework that allows for an ongoing discussion with the government and companies.

What does Lebanon need to do?

If Lebanon were to decide to sign on to the EITI even before production starts, it will need to undertake the following steps:

• The government should announce publicly its desire to adhere to the EITI.

• It should nominate a key person that will act as the national coordinator and will be responsible for implementing EITI requirements and interacting with the EITI secretariat in Oslo.

• It needs to commit to work with civil society and companies, and establish an MSG to oversee the implementation of the EITI.

• The MSG is required to develop a workplan, fully funded and aligned with the reporting and validation deadlines established by the EITI board.

• The government should submit an EITI candidate application to the EITI board that will decide either to accept or refuse the application.

The important element is for civil society organizations to be ready and able to choose their representatives in the MSG. Currently the Lebanese civil society movement is shy and hesitant when it comes to tackling the natural resource issues, and not close to establishing a coalition of organizations capable of injecting its representatives within the MSG. Therefore, civil society’s readiness is crucial for any future steps towards signing up to the EITI. Without this readiness, Lebanon can dismiss any hope for properly managing any resources — and optimally benefitting from them.

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Economics & PolicyLebanon's water crisis

Quality concerns

by Matt Nash
written by Matt Nash

There’s something missing from the debate about Lebanon’s water woes, several experts on the topic argue.

“Engineers, the government, they care about quantity,” says Samira Korfali, an associate professor of chemistry at the Lebanese American University whose water research focuses on metal content in water. “I care about quality.”

Indeed, the government’s response to this year’s more severe than average water shortage has been to drill more wells and encourage people to conserve their usage. The National Water Sector Strategy, approved by the government in 2012, stresses the need to monitor and maintain the quality of groundwater, and the National Center for Scientific Research (NCRS) is working on a monitoring program, but whether it is laying the groundwork for a long term monitoring and action plan or will become yet another study conducted and then ignored remains an open question.

[pullquote]“The pace of improvement is not enough for ensuring [a] safe, sustainable water supply” [/pullquote]

May Jurdi, a professor of environmental health at the American University of Beirut who has been studying water quality since the 1990s, is part of the current monitoring program. While she is hopeful the new program will be sustainable, she notes that previous programs have come and gone with no long term impact. “You have cycles of repetition of the same story since 1990,” she says of various water quality programs run either by the government or donors. “And when you look at the actual problems you find, if I go back and say, ‘What were the problems in 1990s and what are the problems now?’ Most of the problems have not been [addressed].” Jurdi adds that there has been some improvement, but cautions “the pace of improvement is not enough for ensuring [a] safe, sustainable water supply.” 

“It has been cycles of moving, improving and then not sustaining,” she says.

Saline invasion 

Because of over pumping of groundwater along the coast, salt water has made its way into some of Lebanon’s aquifers. Ziad Khayat, who in 2012/13 helped conduct the first nationwide groundwater assessment Lebanon has carried out since 1970, tells Executive that, for the most part, quality wasn’t on the agenda. The study did, however, identify increased salinity in groundwater up to “several kilometers inland,” Khayat says. He adds that the year long groundwater study found six of Lebanon’s 44 groundwater basins showed an increase in seawater intrusion compared to 1970. Mark Saadeh, a hydrogeologist who wrote his PhD dissertation on seawater intrusion into the coastal aquifer beneath Beirut and its suburbs, says that continued extraction of groundwater near and along the coast is only exacerbating the problem. 

Saadeh explains that coastal groundwater aquifers are not completely walled off from the sea, meaning there is a point at which the freshwater stored in an aquifer and seawater meet. As the level of groundwater lowers, seawater can push its way in. Both Saadeh and Khayat argue that once seawater enters an aquifer, it is difficult, time consuming and expensive to push back out again. In a 2006 paper, Spanish researchers detailed how they were able to reverse seawater intrusion, but one of the most important components of their methodology was strict monitoring and management of pumping — something no one is currently paying any attention to in Lebanon. As anyone who has read the “Rhyme of the Ancient Mariner” knows, seawater is undrinkable. Saadeh adds that it corrodes pipes and does not lather when one tries to wash with it. As for using salty water to do laundry, he notes, “Your clothes will never be clean.”

Shitting where we drink

Subsoil seawater surge is not the only threat to Lebanon’s groundwater. Far less well documented is wastewater contamination of the country’s subterranean aquifers. Khayat says that the groundwater monitoring program he worked on did not focus on this type of pollution and notes there is little documented evidence of the problem. However, Lebanon’s aquifers are mostly composed of limestone, which are highly porous and easily refilled, something he describes as a blessing and a curse. Because of their physical characteristics, Lebanon’s aquifers collect rainwater — and more importantly melting snow — as it absorbs into the soil and trickles down. They do not, however, discriminate in terms of collection, meaning wastewater dumped onto the ground, poured into dry wells and septic pits, or released into rivers can also wind up in the groundwater. 

Jurdi, the AUB professor, says the results of the NCRS study are not yet complete. That said, she and others argue that Lebanon’s wastewater situation is a mess. Assem Fedawi, the sector manager for water and wastewater planning and programming with the Council for Development and Reconstruction (CDR), tells Executive that currently Lebanon has eight working wastewater treatment plants connected to sewage networks, up from four in 2010. Of the eight, three are along the coast and five are inland. He says of the inland plants, however, that “not all of them are handling a full flow,” meaning they are not being used to full capacity nor collecting all of the wastewater being created around them, partly because they are not connected to the sewage network.

[pullquote]Intermittent water supply — a yearly occurrence in Lebanon — is also a potential source of water contamination[/pullquote]

The connection issue is a serious problem in Lebanon. In 2010, there were seven completed wastewater treatment plants sitting idle because they were not connected to the sewage network. Fedawi says four have since been connected. Asked how a plant could be built but not connected to the network that feeds it the wastewater it is supposed to treat, Fedawi says that following the Civil War, Lebanon received a large influx of foreign donations to rebuild the country’s largely decimated infrastructure. CDR built the plants, he says, and municipalities near where they are located were supposed to construct the required sewage networks to make the plants usable. In many instances, that never happened. Since 2010, however, the CDR’s strategy changed and it now will also build sewage networks for any treatment plants it builds. As for how much wastewater gets treated in Lebanon today (in 2010 it was an estimated 8 percent), he says his personal estimate is “closer to 20 percent,” but he admits, “we don’t have any data.” He says $1 billion has already been spent on the country’s wastewater system and estimates a further $1.5 billion is needed to finish the job. 

Randa Nemr, an advisor to the Minister of Energy and Water, tells Executive that, despite the fact that groundwater supplies may be contaminated by wastewater, the water supplied by the country’s four water establishments (i.e., water from the government’s network) is safe to drink as all of it gets treated before distribution. Jurdi, the researcher, concurs, explaining to Executive that government supplied water is perhaps the most reliably safe water in the country.

Fill ‘er up

The lack of data on groundwater quality raises health concerns for people buying tanks full of water from unregulated delivery trucks. Nohad Al-Homsi, a project officer with the World Health Organization in Lebanon, tells Executive that even when using water for personal hygiene, laundry or washing dishes, the water should be safe to drink. She dismisses the notion of ‘service water’. Like others interviewed for this article, she has no solid information on how safe water delivered by trucks is, but as Executive reported last month, neither the Ministry of Health nor the Ministry of Energy and Water are monitoring this privately delivered water. Jurdi explains that the health costs of unsafe water use in Lebanon are also unknown. Exposure to contaminated water, she says, can cause diarrhea, headaches and fever, but adds that people don’t realize the risks associated with dirty water and therefore often do not link water to health problems when speaking with their doctors. 

Both Al-Homsi and Jurdi note that the seasonal intermittence in water supply — a yearly occurrence in Lebanon — is also a potential source of water contamination. Al-Homsi explains that when a household’s water storage tank runs empty and is then refilled, the refilling causes sediments at the bottom of the tank to mix with the water and come out through the faucets. She says people should let the taps run for a few minutes before using water after a tank has been refilled. Jurdi says that empty water pipes can also absorb any wastewater that may be wetting the ground around them, bringing that contaminated water into a home when the pipes fill up again. 

Crop concerns

Perhaps the most alarming public health concern in the water sector relates to agriculture. Some farmers in the Bekaa, according to Fedawi, are using wastewater to irrigate their crops — particularly this year when “there is no water.” Again, the extent of the problem is far from clear. Korfali, the LAU professor, tells Executive that metal contamination of plants is not a problem. Yet Jurdi says that contamination from organic materials such as fecal matter very well could be. She did not have much data, but says she recently participated in an as yet unpublished, small scale pilot study of plant contamination and found “alarming” levels of fecal contamination with “isolates” such as bacteria and viruses in the plants, which are “resistant to the antibiotics that were given.” She cautioned, however, that the study was not large enough to make conclusions about the safety of vegetables in Lebanon. “But this is expected. All studies say that if you use wastewater [for irrigation], this is what will happen.” 

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Editorial

A dream turns to shame

by Yasser Akkaoui
written by Yasser Akkaoui

This month’s oil and gas special report was painful to write. What started as an exciting research project on what promises to be the industry that could break the vicious cycle of corruption and cronyism ended up being a reality check that thrusts the truth in our face again. The oil and gas industry won’t be governed any differently from any other public institution in Lebanon.

The level of murkiness that this magazine’s top investigative journalists witnessed while trying to gain access to accurate information confirmed our suspicions that the system in place was designed to accommodate our politicians’ revolting dishonesty. Corruption should not make its way into the oil and gas sector, but sadly, we don’t see how the system in place will promote transparency and accountability for the people’s benefit.

Similar to the Gulf leaders who became intoxicated on oil and gas fumes — leaving their peoples underdeveloped, unemployed and uncompetitive — our own princes, dictators and thieves will not act better. Any riches that might emanate from our untapped natural resources will go directly into their pockets instead of being invested in Lebanon’s entrepreneurship and human capital.

To combat this, the public must know the terms of oil and gas contracts before they are signed. When consortia of oil and gas companies finally begin operations here, ideally, why not make them list on the Beirut Stock Exchange and float at least 60 percent of their shares? The public is a partner in this new enterprise and should be treated as such. Forcing companies to list would also give the bourse a much needed boost. Perhaps most importantly, it would force the consortia to be up front about their commitment to best practices financially, environmentally, socially and in terms of governance.

We should also begin planning how to use physical gas deliveries — potentially part of the state’s royalty payments — to benefit local industry. After the Civil War, and particularly between 2000 and 2010, Lebanese industry began diversifying and increasing output. Four years ago, industry was starting to compete in the high quality products clusters. We were beginning to look more like Europe than Africa. Since 2011, we’re trending down again, both in terms of production numbers and product class, mainly due to the price and availability of electricity. If we don’t plan how to use oil and gas to benefit local industry, we’ll be throwing away a golden opportunity. 

For now, the view is dim. Our fears that mismanagement will rule the nascent oil and gas industry are repeatedly being confirmed. At least we have local wines, arak and a growing range of beers to help us drown our sorrows and hope for a better day.

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Economics & PolicyOil & gas 2014: On hold

All at sea

by Matt Nash
written by Matt Nash

This article is part of Executive’s special report on the oil and gas sector. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.

 

Protecting the world’s waters from pollution associated with offshore oil and gas exploration and production is not a global priority. While then-Russian President Dimitri Medvedev in 2010 suggested before a G20 meeting that world leaders hammer out an international “convention or several agreements” aimed at setting global environmental standards for offshore drilling, four years later only the G20 Global Marine Environment Protection Initiative website exists. A 2014 study by the Paris based Institute for Sustainable Development and International Relations found that national laws regarding environmental protection in offshore drilling vary, and regional agreements covering various bodies of water exist but a global framework does not. For the Mediterranean region, an additional protocol to the 1976 Barcelona Convention for Protection against Pollution in the Mediterranean Sea specifically related to protecting the sea from oil and gas activities went into force in 2011, but Lebanon is not a signatory. Despite that, Lebanon commissioned a strategic environmental assessment (SEA) for offshore oil and gas activities that same year.

The authors of Lebanon’s SEA — British consultancy RPS Energy — note in the document that a broad SEA is only the beginning of proper environmental management for a new offshore oil and gas industry. The SEA says that under European law, companies are required on a project-by-project basis to conduct more detailed environmental and social impact assessments, a practice it encourages Lebanon to adopt. Both Lebanon’s Petroleum Activities Regulations and the 2010 Offshore Petroleum Resources Law call for the companies drilling in Lebanon’s waters to conduct such assessments.

Project-by-project assessments will be helpful in Lebanon — if properly conducted — to both create a baseline environmental picture and help monitor the situation to ensure that environmental damage done by any oil or gas activities in the future is kept to a minimum. The SEA notes that, currently, Lebanon lacks sufficient data to have a full sense of what the baseline picture is today. Olof Linden, a professor of marine environment management with the World Maritime University in Sweden, tells Executive that monitoring and evaluation of the project specific assessments will be important going forward. “Traditionally,” he says of environmental assessments in offshore projects, “it’s a mixed experience. In many [countries], they are just a paper product, something that exists as a condition in a contract, something that the client can tick off as has been done. ‘Ok, here’s the document, let’s move on.’”

Pipe dreams

One prospective project the SEA was particularly harsh on is a planned onshore natural gas pipeline connecting Tripoli to Tyre. The project has been talked about for years now but is still awaiting parliamentary approval. In the SEA, it is stated that, while the Ministry of Energy and Water was, at the time, still pushing for the onshore pipeline, the Ministry of Public Works and Transportation wants to revive the railway line envisioned as the route for the pipeline. Parliamentarian Mohammad Qabbani — who heads the legislature’s Energy, Water and Public Works Committee — says the project raises major safety concerns, and while he stops short of saying that parliament will not approve it, he was not hopeful that it will come to pass. Noting that to build the onshore pipeline, existing property on the rail line would have to be demolished and Palestinian refugees would have to be resettled — along with the fact that coastal erosion could seriously impair the pipeline’s ability to stay onshore — the SEA authors stop short of calling the idea a disaster, but end a list of problems with the pipeline — for which no environmental assessment had been conducted — by writing that “the proposal demonstrates why detailed and transparent Environmental and Social Impact Assessments are considered mandatory for sensible planning, development and project management.”

Work ahead

The SEA also argues that Lebanon lacks a national oil spill response plan. The second volume of the eight volume document is RPS’s recommendation for such a plan. What will become of it, however, is unclear. Executive was unable to speak with the LPA about the SEA in detail, however, in mid-September, the LPA announced on its website in a procurement notice that it was looking for a third party to provide “professional services for the preparation of a National Oil Spill Contingency Plan.” Additionally, the LPA will have assistance in developing a response plan from a new project partially funded by the UN called Sustainable Oil and Gas Development in Lebanon (SODEL). The three year, $2.2 million project launched in May 2014 is designed to work with the LPA on developing and implementing industry specific health, safety and environmental regulations. SODEL will also write policy recommendations for the best use of resource revenues.

Among other concerns, the SEA also notes that Lebanese institutions lack capacity for oil and gas activities, something the government should work on addressing in the not too distant future.

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CommentOil & gas 2014: On hold

Fighting the resource curse

by Jad Chaaban
written by Jad Chaaban

This article is part of Executive’s special report on the oil and gas sector. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.

 

“Ten years from now, 20 years from now, you will see: oil will bring us ruin … Oil is the Devil’s excrement.” This statement from Juan Pablo Pérez Alfonso, an OPEC founder, illustrates a common phenomenon linked to the discovery of hydrocarbon resources, coined the ‘resource curse’. In a nutshell, this concept links the increased exploitation and reliance on natural resources with the systematic decline in other economic sectors, specifically agriculture and manufacturing. The economy will be geared toward one sector which absorbs all the resources, labor and attention of policymakers, which would eventually reduce investments in other sectors of the economy. These symptoms are even more dangerous in countries with poorly run and corrupt institutions, non-democratic regimes and weak financial systems. Several countries with abundant resources, such as Nigeria, Angola and Chad, experience rampant poverty and widespread economic failures to this day, despite their riches. It is precisely this gloomy condition that Lebanon should try to avoid.

A set of reform policies needed

The discovery and extraction of oil and gas off the shores of Lebanon would ultimately translate into a boom in revenues for the government, which under the current conditions of poor fiscal planning could easily translate into an uncontrolled expansionary budget policy. If these revenues are spent with no oversight and proper planning, we might end up having large streams of cash that make limited contributions to economic development.

Although the oil and gas law enacted a couple of years ago by parliament stipulates the creation of a sovereign wealth fund to manage these resources, it left the details of this fund and its spending parameters to a future law, and placed these expenditure decisions in the hands of the parliament. With the existing track record of our politicians in mismanaging current revenues, there are serious doubts about its capacity to manage additional revenues.

But the ‘resource curse’ could be avoided if appropriate policy adjustments are implemented in conjunction with the development of offshore hydrocarbon resources. The successful experiences of a few resource rich countries like Norway have been largely attributed to their success in managing resource wealth and its associated risks. The optimal response that takes advantage of the boom while mitigating its potential negative implications includes a set of fiscal, monetary, exchange rate and structural reform policies.

Two principal decisions need to be made when designing a fiscal policy response to the resource curse: first, how much should a government spend from its resource revenues across time? And second, on what should the government spend its resource revenues? Adopting a revenue sterilization policy — whereby foreign exchange reserves are accumulated — can constrain the spending effect and as a result curb a currency appreciation. In that respect, the government must resist the pressure to enjoy all the additional revenues in the short run and recklessly expand its budget expenditure. On the contrary, it must commit to saving part of the revenue proceeds in order to attain a permanent wealth increase.

As for how the windfall revenues should be allocated, the government must be careful not to spend the wealth in a way that would increase the domestic aggregate demand for non-tradable goods and services which would consequently appreciate the real exchange rate. In that respect, the government must direct its spending toward the non-resource tradables sectors through subsidies or by investing in physical and human capital to enhance the productivity in these sectors.

Moreover, the discovered hydrocarbon resources can be helpful if, and only if, there is an energy substitution strategy away from costly imported oil, which includes (a) the renewal of existing energy production facilities; (b) connecting pipelines with offshore and onshore facilities in an integrated energy demand and consumption framework; and (c) respecting the environment and urban fabric around electricity production sites.

Such steps will be complicated and require a detailed level of design and execution. But without such an integrated, overarching plan of action, Lebanon will not be able to escape the very real dangers of ‘the Devil’s excrement.’ No one wants that to happen — not in 10 years, 20 years or ever.

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Economics & PolicyOil & gas 2014: On hold

Keeping it clean

by Jeremy Arbid
written by Jeremy Arbid

The Lebanese Petroleum Administration (LPA) recently published a strategic environmental assessment (SEA) related to potential offshore oil and gas activities. RPS Energy Ltd., a multinational energy resources and environmental consultancy company, initiated the study in October 2011 and completed it five months later. RPS will continue to provide consultation to the Ministry of Energy and Water (MoEW) and the LPA as the sector moves forward, with the recommendation to further assess the environmental impact of drilling for potential reservoirs, processing reserves and transporting oil or gas.

To guide readers of the SEA, Executive has scoured the publication, intended as a reference, to locate specific information and data held within the approximately 900 page document.

Click on the sections below to start exploring.

 

Introduction to environmental assessments
Volume 1: SEA report
Volume 2: National contingency plan
Volume 3: Stakeholder management
Volume 4: GAP analysis
Volume 5: GIS
Volume 6: Registers
Volume 7: Onshore pipeline route
Volume 8: Field survey instruction manual

SEAs are different from environmental social impact assessments (ESIA) in that SEA studies prescribe long term policy planning for an entire region or sector, whereas ESIA studies guide planning on possible alternatives for specific projects and also propose an environmental management plan (EMP) to include monitoring measures and indicators.

According to the United Nations Environment Program (UNEP), an SEA is an “approach to take account of the environmental effects of policy, plans and programmes.” Often employed to obtain and evaluate environmental information, SEAs are useful in generating policy to guide decisionmaking, containing predictions of how the environment is expected to change if certain alternative actions are implemented with advice on how best to manage environmental changes. In Lebanon’s SEA, RPS Energy writes that the process is intended to strike “a balance between promoting economic development of offshore energy resources and effective environmental and community protection.”

UNEP defines ESIAs as “a procedure that identifies, describes, evaluates and develops means of mitigating potential impacts of a proposed activity” at the project level. RPS Energy prescribes that individual impact assessments be conducted by the exploration and production companies as part of contractual agreements (i.e. exploration and production agreements) between the Lebanese government and oil and gas operators.

Both SEA and ESIA studies are useful for a variety of audiences. These include national and local government staff whose responsibility lies in ensuring effective implementation of the studies’ recommendations and in evaluating and approving development project design. Likewise, the staff of multilateral and bilateral agencies charged with sustainable development projects use the studies to identify, design and implement projects. Private sector actors, particularly those companies with environmental responsibilities (e.g. drilling companies) make use of the studies to ensure proper safety measures are included in project design and implementation. Finally, SEA and ESIA studies are of the utmost importance to civil society, including environmental nongovernmental organizations, which have a vested interest in environmental protection and sustainable societal development.

Volume 1 of Lebanon’s SEA introduces RPS Energy’s study of the country’s exclusive economic zone (EEZ) — its purpose and methodology — outlined through several sections: an overview; a presentation of potential scenarios; risk and impact assessment and evaluation; oil spill scenarios; and assessment, recommendations and conclusion.

The scenarios section outlines seven potential outcomes during the exploratory drilling phase and the options for transporting gas from receiving terminals or LNG plants to power plants.

In Scenario 1, for example, where no commercial reserves are found during exploratory drilling, activities would cease, leaving limited impact on the environment and the economy (e.g. limited job creation).

By contrast, in Scenario 5, where exploratory drilling locates multiple commercially viable oil or gas reservoirs, significant (some positive, some negative) environmental (e.g. air emissions and infrastructure construction), economic (e.g. high generation of revenues), socio-cultural (e.g. price increases) and institutional (capacity deficiencies in authorities) impacts would result.

Mapping possible oil spill incidents — which could occur throughout the drilling and production phases — is also explored in this volume. Because the possible crude oil reserve characteristics are still unknown within Lebanese waters, trajectory models for possible spills of four types of oil — diesel, condensate (from gas wells), light crude and heavy crude — are included, with variables including the quantity and duration of spill release.

Scenario 1:           No commercial findings
Scenario 2:         Lean/rich gas and petroleum liquids — onshore bias
Scenario 3:         Lean/rich gas and petroleum liquids — offshore bias
Scenario 4:         Crude oil and rich gas
Scenario 5:         Multiple and successive field developments
Scenario 6:         Nearshore oil/associated gas
Scenario 7:         Onshore gas transportation and use

 

1,000m³ instantaneous heavy crude spill from center EEZ position (Trajectory)
O&G_begin_map2_Vol 1 SEA Report - SEA for Petroleum Activities-81

Source: Strategic Environmental Assessment

 

5,000m³ 40 day blowout of heavy crude oil from the southern EEZ position (Trajectory)
O&G_begin_map1_Vol 1 SEA Report - SEA for Petroleum Activities-89

Source: Strategic Environmental Assessment

Volume 2 of the SEA outlines the framework for formulating a national contingency plan (NCP) to mitigate marine pollution and coordinate an oil spill response. Among the framework prescriptions is the MoEW’s role as the competent authority to formulate the NCP as the coordinating government agency responsible for oil spill preparedness and response, to request external assistance if needed, to gather oil pollution reports, and to coordinate participation of the petroleum sector in the implementation of the NCP.

To advise the MoEW in formulating and implementing the NCP, a National Contingency Planning Committee (NCPC) would count as its members:

– Minister of Energy and Water (chair)

– Ministry of Environment

– Ministry of Public Works and Transport

– Ministry of Agriculture (Fisheries)

– Representative of each of the Petroleum and Petroleum Products Producing Companies

– Chief of Search and Rescue

– Ministry of Interior and Municipalities: Director General of Civil Defense

– Ministry of Defense 

– Ministry of Public Health

– Harbor Master

– National Center for Scientific Research (Marine Biology Specialist)

 

The NCPC will coordinate with the following public agencies whose responsibilities, in mitigating and responding to oil spill incidents, include:

 

Ministry of Public Works and Transportation

Among the ministry’s responsibilities are navigation safety in Lebanese waters, implementing policy to protect marine environment within both public and private ports, and preventing pollution from ships.

 

Ministry of Defense

Each branch of the military has a role to play. The navy has the responsibility to arrest or escort to the nearest port vessels breaching international or Lebanese law, to conduct routine vessel patrols, and to monitor, sample and report any pollution incidents. The air force will undertake routine air patrol missions to protect Lebanese waters and establish aerial surveillance to identify polluters and oil slick incidents. And the army, when requested, will assist the MoEW in the organization of manpower and equipment during shoreline cleanup following oil spills.

 

Local government

The four coastal governors will each appoint a representative to the NCPC in the case of a major spill, to coordinate local shoreline cleanup action, and will be responsible for providing temporary storage facilities and final disposal sites for oily wastes during spill cleanup efforts.

 

Ministry of Finance

Customs authorities will be responsible for approving the temporary import of oil spill combating equipment without payment of duties.

 

Ministry of Interior and Municipalities

Responsible for immigration, the ministry will approve temporary immigration without delay for oil spill strike teams to assist in spill incident cleanup.

 

Ministry of Public Health

Responsible for preparing contingency plans and arranging for expertise to cover potential health hazards resulting from oil spill accidents.

The third volume of the SEA outlines a Stakeholder Engagement Plan (SEP) used to demonstrate a comprehensive stakeholder engagement process from program conception through project development, and engaging stakeholders (a registry of whom can be found in Volume 6: Registers) across communities and interests affected by the development of an oil and gas industry.

Including stakeholders in the preparation of the SEA allows the recording of concerns by industry experts, government officials and civil society. Some of the main issues raised by key stakeholders were:

 

Ministry of Agriculture

“Concerns of negative impacts on the fishery cooperatives and community” though “new fisheries legislation is pending.”

 

Ministry of Environment

“The MoE is under-resourced” but the ministry’s Environmental Impact Assessment decree has been ratified.

 

Ministry of Interior and Municipalities

“Search and rescue is under resourced and could not cope with oil spills.” Lebanon has begun to address this concern by restructuring the country’s civil defense, granting volunteers full employment status and improving the force’s ability to respond to disasters.

 

United Nations Population Fund

“Fears that money or profit will be taken by corrupt officials [thus] preventing regeneration.”

 

CNRS

“Adverse impact on marine life from oil and gas activities.”

 

Multiple sources

“Fear that there is no accountability or communication either between or within the ministries” and “lack of awareness of what an SEA/ESIA and offshore exploration entails.”

The RPS consultation team highlights the range of concerns and comments in the Concerns Registry.

One of the main points made by RPS in this section regarding stakeholder concerns is that “it does not matter whether the concerns are founded or unfounded; there is an obligation from the MoEW or the industry to respond.”

This volume presents an overview of the available environmental and socio-economic data and information on Lebanon at the time the study was conducted. Its purpose is to emphasize the weaknesses in this data so that Lebanese authorities can address the deficiencies in preparation for commencement of oil and gas development activities.

Regarding the data available for use in this report, the authors wrote that there is a “serious data deficiency, and this is alarming in the context of a developing oil and gas industry.” It provides an overview of the petroleum industry and the primary concerns including its impact on a number of factors from oil and gas itself to closely related fisheries and water to tourism, cultural heritage and anthopogenic effects.

Oil and gas: A full review of the upstream, midstream and downstream, including techniques and equipment used.

Onshore ecology: Summarizes the available data for coastal and lowland habitats; vegetation; birds; mammals; reptiles and amphibians; terrestrial invertebrates; fish; and other sensitive areas.

Fisheries: A thorough review of the legal and regulatory framework for fisheries in Lebanese waters.

Air: A summary of air quality and air pollution concerning public health and assessment of data available for air quality management.

Social: An assessment of the social impacts, a thorough review of the available data on demographic trends, wealth distribution, employment and workforce, poverty, ethnic context, cultural makeup, political structures, gender, life expectancy, literacy, land ownership and usage, crime, infrastructure and energy use.

Tourism: A thorough assessment of the temporary and sustained impacts felt by coastal and marine tourism.

Anthropogenic [influence of human activity] effects: Focus on the data available considering non-routine impacts such as oil or chemical spills, fire and unexploded ordnance as well as anthropogenic impacts not considered in the other sections.

Environmental law overview: A thorough review of the environmental legislation in the context of the oil and gas exploration lifecycle and also air, water, soil, biodiversity, land use, agriculture, energy, industry, construction, transportation, noise, solid waste management and tourism.

Offshore ecology: A summary of the available data for benthic and planktonic species, demersal and pelagic fish, marine mammals and reptiles

Water: An extensive overview of the available data on water management and usage, regulatory framework and planned strategy

Waste: An analysis of available data on municipal solid waste management, waste generation, waste streams and waste infrastructure

Health: An analysis of the impacts on public health including regulatory framework and review of existing available data

Cultural heritage: An assessment of the baseline and potential impacts on archaeological remains, historical buildings, and historic landscapes in both offshore and coastal onshore zones

This volume comprises a description of the available GIS (geospatial) datasets acquired by the RPS consulting team, including the methodology in organizing the metadata for use in informing decisionmaking by the relevant authorities (e.g. the MoEW). The primary recommendation of the RPS team to the MoEW is to set up a geoportal to increase dialogue between the MoEW/LPA and stakeholders to share the GIS information, avoid inconsistencies and facilitate data exchange.   Aggregating datasets from various sources including the MoEW, the army, NGOs, various state organizations and private companies will better assist decisionmaking.

This volume includes the law, consultation notes, identification of stakeholders engaged and a list of data acquired from specified stakeholders. It is intended to be continually updated.

The legal register contains the code and number of legal articles consulted, with a description of the legal requirements for various issues as well as the limitations of a specified piece of legislation.

The stakeholder register lists the names and contact information of all stakeholders engaged throughout the data acquisition and study life cycle.

The consultation register is a record of the details and outcomes of meetings, conversations and verbal agreements between the RPS consultation team and stakeholders.

The data acquisition register lists all data or documents received from stakeholders.

The concerns register records all concerns raised to and by the RPS consultation team based on consultation with stakeholders and RPS interpretation of in-country observations and secondary research.

This volume shows, through pictures, the proposed route of an onshore pipeline stretching from Tripoli in the north of Lebanon — bypassing the Greater Beirut area offshore — to Tyre in the south of the country.

 

  Proposed onshore pipeline route
O&G_begin_MAP3

Source: Strategic Environmental Assessment

The final volume of the SEA provides a description of surveying and sample techniques as an instruction guide for conducting further offshore, biological and social surveys as well as a starting manual to carry out future ESIA baseline surveying.

 

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Economics & PolicyOil & gas 2014: On hold

High expectations

by Jeremy Arbid
written by Jeremy Arbid

This article is part of Executive’s special report on the oil and gas sector. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.

 

Much has been said regarding the prospects for oil and natural gas in Lebanese waters. Extensive surveying — the entirety of the country’s offshore waters has been spanned by 2-dimensional seismic surveys while 70 percent has been covered by the 3-dimensional kind — has resulted in the identification of the zones most likely to contain recoverable hydrocarbons, drawing interest from 46 companies that prequalified to bid in Lebanon’s first offshore licensing round.

A Lebanese Petroleum Administration (LPA) map from 2012 shows where the greatest potential to find resources may exist. The results of seismic surveying have resulted in assessments which companies can use to drill exploratory wells and thus test projections of reserves in Lebanon’s exclusive economic zone.

The results of surveying suggest the different zones contain gas reservoirs at different depth: biogenic gas is formed at shallow depths and low temperatures by bacterial decomposition of organic matter, suggesting lower costs in drilling and extraction. Thermogenic gas, in contrast, is formed at greater depths through thermal cracking of decomposed organic matter or oil into gas — where molecular bonds are broken due to high heat and temperature — suggesting higher costs in drilling and extraction.

The seven zones are delineated according to geological similarities and characteristics of different petroleum systems (the geophysical qualities essential for oil or gas to accumulate). In referring to this map, exploration probability of success for the zones has not been projected, nor do the zones directly relate to the 10 proposed offshore blocks.

To better appraise how much gas or oil an area might produce, experts use what are called P50 calculations. These show a middle of the road estimate for the volume of gas or oil, and are the norm for projecting exploration success so as to manage expectations. For instance, a P50 of 10 trillion cubic feet (tcf) of gas means that, based on all available evidence, experts predict that the probability of finding at least 10 tcf to be 50 percent — that is, there’s an even chance there’ll be either more or less than 10 tcf. The more conservative P90 and optimistic P10 calculations can also be used to bracket expected outcomes.

In a September conference hosted by the Research and Strategic Studies Center of the Lebanese Armed Forces, the LPA outlined the P50 for offshore blocks one, four and nine. In block one, the P50 for natural gas is 14.9 tcf and +440 million barrels (mmbbl) of oil; in block four the P50 projection is 13 tcf and +425 mmbbl; while in block nine the P50 is 15.2 tcf.

These are merely projections based on seismic surveying and, until drilling in Lebanese waters occurs, 100 percent accurate figures on what lies below the waves cannot be confirmed. But to give some perspective, Iran — the world’s leader in proven gas discoveries — stands at 1,192.9 tcf at the end of 2013, according to the BP Statistical Review of World Energy June 2014. Lebanon might only find a fraction of this amount, not a global game changer, but certainly significant within the regional context.

Further data of the offshore area through electromagnetic surveying (useful for penetrating Lebanon’s thick layer of salt) and core sampling (useful to identify temperatures of the reservoirs) might result in more accurate assessments of where companies should drill exploratory wells, reducing time and saving money.

For now, these indicators are very encouraging. But no amounts for oil or gas can be confirmed until exploratory wells are drilled. Lebanon will have to wait before needed decrees are passed, allowing companies to come explore the country’s exclusive economic zone.

[media-credit name=”Lebanese Petroleum Administration” align=”aligncenter” width=”580″]WHERE GAS_map1[/media-credit]

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Economics & PolicyOil & gas 2014: On hold

Looking onshore

by Matt Nash
written by Matt Nash

This article is part of Executive’s special report on the oil and gas sector. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.

 

Although Lebanon’s seven onshore exploration wells — drilled between 1947 and 1967 — all turned up dry, that does not mean there are no hydrocarbons buried beneath Lebanese territory. In fact, the search for onshore oil or gas resources is ongoing, despite complications related to security problems along Lebanon’s northern and northeastern borders with Syria. US based NEOS GeoSolutions plans to conduct aerial onshore surveying soon. In an email response to questions for this special report, the Lebanese Petroleum Administration (LPA) says, “The project is under mobilization and [we] expect the wheels up before the end of the month.” A NEOS press release from January 2014 says, “Our neoBASIN survey has been designed to map the regional prospectivity of northern Lebanon by integrating legacy well and 2-D seismic data with newly acquired airborne geophysical datasets. Among other things, our geoscientists will work with the program’s underwriters to identify the relationships among key geologic features that extend into the survey area from offshore structures and from Syria’s onshore petroleum systems, as well as to efficiently highgrade acreage across the survey area.”

The airborne survey will cover 6,000 square kilometers — more than half of Lebanon’s total area. A map included with NEOS’ press release shows the survey area covering the whole of Lebanon stretching from Beirut and north. The LPA’s statement says analyzed data from the survey should be ready in the spring of 2015. More traditional 2-dimensional seismic surveying being shot by the UK’s Spectrum — which carried out 2D and 3D offshore surveys in Lebanese waters — began in 2013, but is currently on hold because of security concerns. Spectrum has so far shot 100 kilometers of a planned 500 kilometers of linear surveying. The LPA says “scouting and seismic line routing design are completed” for the remaining survey areas but “the project involves long hours presence on-site in remote areas exposing the crews to all sort of possible threats that are not few these days.” Results, of course, will not be ready before surveys are finished. NEOS representatives in Lebanon were not available for comment and Spectrum did not respond to an interview request for this article.

On the legal side, the 2010 law governing offshore exploration and production is strictly limited to offshore. The LPA wrote a new onshore law and submitted it to the Ministry of Energy and Water in January. Since then, the LPA says, the draft was sent to “all ministries,” some of which suggested changes that have been incorporated into a newer version of the legislation. The final draft “will be transmitted to the parliament within [a] few days. Ratification date can be decided by the parliament only.”

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