Oil and gas discoveries produce potential Israel-Lebanon flash points

The recent discoveries of massive gas fields off the coast of northern Israel, tantalizingly close to Lebanese coastal waters, has stirred cash-strapped Lebanon to accelerate efforts to begin its own oil and gas exploration.

But the prospect of previously undiscovered fossil fuel riches off the coasts of Lebanon and Israel risks becoming a new source of conflict as well as an economic windfall for the two warring neighbors.

"This is something big and potentially landscape-changing economically, financially, and politically," says Nassib Ghobril, head of economic research and analysis at Byblos Bank in Beirut.

Last year, a US-Israeli consortium discovered the Tamar gas field 55 miles off the coast of northern Israel, which contains an estimated 8.4 trillion cubic feet of recoverable gas – the largest natural-gas find in the world in 2009. Earlier this year, a field called Leviathan was discovered in the same area with an initial estimate of 16 trillion cubic feet of gas.

But there are likely more untapped fields; the US Geological Survey (USGS) said in March that the Levantine Basin, which includes the territorial waters of Lebanon, Israel, Syria, and Cyprus, could hold as much as 122 trillion cubic feet of gas – and 1.7 billion barrels of oil.

Indebted Lebanon

Israel, which could become energy self-sufficient if results meet expectations, began test drilling the Leviathan deposit Oct. 18. The same week, Lebanese Prime Minister Saad Hariri said that Lebanon was close to marking its maritime boundaries with neighbors Syria and Cyprus, which should allow oil and gas exploration licenses to be issued by early 2012.

The prospect of oil and gas beneath Lebanon's coastal waters could have immense benefits for a country short on natural resources and encumbered with one of the highest debt rates in the world, around $52 billion or 147 percent of gross domestic product.

But Mr. Ghobril, the economic analyst, cautions that it is too early to anticipate an oil and gas boom for Lebanon.

A draft bill on energy exploration passed by the Lebanese parliament in August deferred politically sensitive aspects such as deciding on the regulatory body and how to handle any revenues. Lebanon's notoriously turgid bureaucracy and political infighting could also delay the process.

"All of this precedes any positive tangibles in that regard," he says. "The key point is to see how much of [the gas and oil] is economically recoverable. We might all be disappointed but we might also be pleasantly surprised."

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