DEARBORN – Off its shores, Lebanon has $1 trillion worth of oil and gas that can be extracted over 75 years, according to oil expert  and geologist Fuad Jawad. However, he says a careful plan should be set in place to preserve the country’s oil wealth and maximize the people’s profit from it.

“You cannot politicize oil and gas,” he said in an interview with The Arab American News. “The political parties are not in cahoots. They don’t trust each other. If you give them any business, it will die . It will go into the sphere of politics and corruption.”

Jawad, who is the president of PetroServ, a private gas consulting company based in Cyprus, said it is vital for the oil industry in Lebanon to create an independent, nonpolitical entity that would negotiate with the drilling companies and operate the oil business on behalf of the government. 

“The national oil and gas company of Lebanon would be owned by the government but managed by politically neutral technocrats and run like a business,” he said. “It would represent the sovereignty of the country in terms of oil and gas.”

Jawad, a graduate of the University of Texas, said the oil industry should be managed by an impartial company the same way Middle East Airlines (MEA) operate the public airplane business.

Jawad said such an entity would be “the bread and butter” the oil industry. Last year, he submitted a 60-page proposal concerning forming the oil and gas company to the head of the energy committee in the Lebanese Parliament. He said he never heard back from Lebanese lawmakers.

Apart from the national oil company, there are three other main pillars to the gas and oil industry, Jawad said.

According to Jawad, the industry needs an oil and gas ministry to serve as its figurehead. He said the ministry would be for “entertainment” purposes. The minister’s role would be to pass the laws to the prime minister to sign, meet with foreign counterparts and represent the industry in public. A petroleum directorate is also needed to set the laws and regulations, said Jawad. “The stability and security of the country are also essential for the industry,” he added.

Jawad has established the National Oil and Gas Company of Lebanon, a private business that has the goal of providing the international oil companies drilling in offshore Lebanon, with the safe location to continue operating on their oil and gas prospects if the security situation in Lebanon no longer allows it. PetroServ, the Cyprus-based firm, “would be instrumental in providing the necessary logistics to support the companies offshore Lebanon but from the safety of Cyprus as the proximity to the drilling operation(s) would be almost the same.”

He said he is willing to donate the name of the company, as well as its domain on the world wide web (nogcl.com) if the Lebanese government decides to adopt it.

Jawad said he would be interested in playing a key-role in national gas company, as long as it remains free of politics. 

He stressed hiring experts to Lebanon’s oil industry, away from nepotism and sectarianism, because it is a highly technical, operational field.

Former Lebanese Energy Minister Gebran Bassil proposed two decrees that would govern the oil industry in Lebanon. Jawad slammed the decrees and described them as a “disaster.”

The proposals would grant Lebanon 4 percent “royalty” from its gas and oil field. Jawad said the country’s royalty should be around 15 percent. “If I were in a position to negotiate with the oil companies, I would aim for 20 percent,” he said. 

He added that the country’s royalty is relative to the risk taken by the oil company, and the risk of not finding gas or oil in Lebanese waters is low because these resources have been found off the shores of neighboring Cyprus and Israel.

Jawad hinted that the low proposed royalty rate could be due to the influence of agents connected to the oil companies.

“The people who managed the oil industry in the previous government have failed. They were following the model of different countries and the advice of non-Lebanese. These foreign elements have taken advantage of the Lebanese ignorance of oil and gas,” he said. “The parties to blame on this are the people in charge of the oil file. They chose not to educate the Lebanese people and keep them in the dark, so they can have their backroom deals with the oil companies.”

He said some of the companies that the energy ministry deemed qualified for bidding did not have the technical capabilities to drill in Lebanese waters. 

“The pre-qualifications proposed by the ministry required expertise to drill in 500 meters of water, when the majority of oil and gas, as prospect-leads, are offshore Lebanon at a depth between 1500 to 1750 meters of water,” he explained.

He added that the people negotiating with the oil companies did not have Lebanon’s best interests at heart.

Jawad said he also opposes the proposed decrees because they would divide Lebanese water into 10 drilling blocks. He advocates raising the number of the blocks to 16 to increase the competition between the international oil companies, invite more investments to the country and extend the life of the operation.

He said with 16 blocks, Lebanon can keep six blocks from bidding, and later give the opportunity to the country’s own gas company to drill in them after acquiring the experience needed for gas and oil extraction and production.

In addition to the royalty from the oil and gas, Lebanon would receive working interest from the extracted natural resources. Jawad said Lebanon should earn 30 percent of what the oil companies find after they pay royalty and recover their costs. According to Jawad, the current decrees do not define “‘working interest’ as if it does not exist.”

“The oil and gas laws of Lebanon recommend that the government to make a percentage on profit earned by the international oil companies. This would be in the form of income tax. However, what the lawmakers in Lebanon failed to realize is that the profit generated by the international oil companies could be manipulated and reduced by different means, such as creative accounting and uncontrolled cost of operations,” he explained  

Jawad said negotiating with the oil companies and proposing laws for the oil industry before forming a nonpolitical national oil company is like opening a hospital without doctors.

The oil expert called for creating an oil culture in Lebanon through education. He said Lebanese colleges should start offering industry-related majors, such as petroleum engineering and oil geophysics. “But you have to give the incentive to students to pursue these majors by guaranteeing work for graduates,” he stated.

He said the Lebanese national oil company should have its own employees on the rigs instead of requiring the companies to hire Lebanese citizens, in order for Lebanon to retain its experts.

Jawad said the drilling can start three years after signing the agreement with the oil companies. Lebanon’s oil blocks would have to get on a waitlist for the offshore oil rigs, which are not numerous around the world, according to Jawad. “Once you have the rig, drilling only takes 60 days,” he added.

“Deep ocean drilling is the new frontier for oil companies on the planet,” he said. “The oil spill in the Gulf of Mexico showed the potential of offshore drilling. Even though it was a disaster environmentally, people saw the heavy flow of oil. They saw the treasure.”

There is no clear international maritime border that separates Lebanese and Israeli waters. The disputed maritime area between the two countries has prompted threats from both sides concerning drilling in each other’s water. 

Jawad said Lebanon should “disregard” Israel and create its own “buffer zone” north of the disputed area to avoid confrontation with the Zionist state.

“It is very easy, but a lot of people complicate it,” he said. “Don’t even tamper with Israel. There is a conflicting zone between the two countries. I would add an equal size area to it, to the north, and drill next to the buffer zone. This way, Israel has no complaints. You don’t want to engage yourself in the disputed area, which is about 800 sq km (308 sq miles). That will keep Israel shut away.”

Jawad added that the buffer zone would prevent Israel from justifying any military attack on Lebanon’s gas and oil venues. 

He said south Lebanon would be the logical place to start drilling because it is next door to Israel, which already proved that the area contains oil and gas. 

A similar maritime border dispute arose with Cyprus, but Jawad said he would not “waste time” with Cyprus because the closer you are to Cyprus, the deeper the water gets, which diminishes the possibility of finding oil. “What you have between Cyprus and Lebanon is very deep. There’s little or nothing out there,” he said.