Editor’s note: The Daily Star talks to energy expert Roudi Baroudi regarding the prospect of tapping the energy resources off Lebanon’s coast, as well as the benefits, risks and challenges involved in such an endeavor.

Q. What, in your view, are the risks in Lebanon moving ahead with its oil and gas potential?

A: The real risks stem not from action but rather from inaction because Lebanon is still putting its energy house in order. Thanks to Parliament Speaker Nabih Berri, who is always a staunch defender of Lebanon’s vital energy interests, in 2010 we enacted a key piece of legislation, one of several milestones Lebanon has needed since 2000.

Now, to diminish any tensions or risks Lebanon could face, the government will have to follow up with the U.N. under the U.N. Convention on the Law of the Sea (Unclos), to which the E.U. has adhered, for the delineation of Lebanon’s offshore exclusive economic zone. Cyprus already has delineation deals with Israel and Egypt, and its pact with Lebanon awaits ratification by Parliament. Relying on Unclos will highlight Lebanon’s rights and responsibilities relating to our natural marine resources in what is officially known as the Levant Basin Province; specifically, it will define Lebanon’s rights to exploration and drilling activities. This will leave Lebanon with properly demarcated borders, leaving no contention, especially in our patch of the Eastern Mediterranean.

Q. What is the role of the United Nations? Is it true that UNIFIL should have an active role in this field?

A: One way or the other, Lebanon has to use U.N. mechanisms, including the Unclos pact and filing a complaint at the U.N. Security Council. Unifil was created in 1978 by a Security Council resolution that was also supposed to confirm the withdrawal of the Israeli occupation forces from Lebanon. After the 2006 war, a maritime task force was added to Unifil’s role to prevent seaborne illegal arm shipments, but right now I don’t believe the force and its dozen or so vessels have a mandate to protect any hydrocarbon reserves off Lebanon’s coast.

Whatever the eventual case, given that the economic stakes are so high, Lebanon has to continue to define its territorial sea and contiguous border through Unclos, which we have been party to since 1995, but which Israel has not yet joined. Diplomacy offers the most logical solutions for any potential problems in this area, and we should exhaust this option before considering any other options.

Q. What if it turns out that the Leviathan Gas Field lies within both Lebanon and Israel’s offshore economic zones?

A: It looks like this huge field could well straddle our maritime borders with Israel – and possibly Cyprus too. Disputes over oil and gas fields are not new, they exist all around the globe, and there will be more disputes to come. For example, Argentina has gone to the United Nations to defend its rights over Britain’s drilling off the Falkland Islands. A dispute recently arose between Iran and Iraq over a small oil field near the southern portion of their shared border. China and Japan are also at odds over an East China Sea gas field. And an oil-rich region in South Sudan is seeing the same kind of political feuding with the central government in Khartoum.

The most important step was when Berri came out and said we should move forward by following up on our hydrocarbon act, enact the relevant downstream laws, invite international oil and gas firms, establish a national oil company, and develop a coherent government energy policy. He was right. This is the only way we can achieve the right fiscal and regulatory environment, and start tendering for blocks in offshore areas not subject to dispute, not to mention some of our onshore prospects as well.

Parallel to these efforts, we should also use every diplomatic tool at our disposal, assisted by our major allies in the Arab world, in Europe, and even the United States to define our maritime boundary and to force the Israelis to respect UNCLOS, even if they aren’t members of it.

Q. What about Israeli advantages?

A: You have to be objective here; the Israelis have had a head-start in their hydrocarbon geology and assessment. Their drilling and exploration activities started in the early 1960s, becoming even more active in the 1970s, to the point where their offshore seismic exploration and other testing has already covered 450 wells. When Lebanon should have been catching up, especially when this most lucrative of commodities could be a veritable savior for the national economy, it became mired in a civil war that ended only in 1990, and has spent much of the time since mired in unfortunate political skirmishing. Nonetheless, with the right policies that create incentives and a transparent business environment, there is no reason why we can’t start making up for lost time in short order.

Q. What are in your views the benefits to Lebanon?

A: The economic benefits to Lebanon would be in a typical evolution process; first, once all the fiscal, legal and business environment parameters are defined, Lebanon will first benefit from being able to go ahead with an international licensing round and the boost of its infrastructures. This could be in a typical exploration; drilling and production process could vary between $1-1.5 billion.

The second evolution process would tackle the international service companies which through their foreign direct investments, could reach between $200-250 million for each exploration block they are working on.

Finally, once you reach the production level, if we consider the productive life of some of the fields that have been prospected is in the range of 20-25 years each. Today’s average oil price is quoted around $92/barrel, considering our basin/fields have a potential reserve of 85,000-88,000 of T.O.E. (Tons of Oil Equivalent), we should consider that the treasury should attain an income $3-$3.5 billion a year for the next 20-25 years.

The benefits to Lebanon go beyond the fiscal. It will meet all Lebanon’s local energy demand and will insulate the country from volatile energy prices.

Q. What would you recommend in this regard?

A: Lebanon’s onshore and offshore provinces are definitely positive economic factors to Lebanon’s economic development. I still strongly believe that Lebanon needs political consensus to bring serious thinking on Lebanon energy security and to ensure the appropriate production of our hydrocarbon wealth. Dialogue and diplomacy should protect any future disputes and attract enough capital from international oil and gas companies for this massive program implementation.

Roudi Baroudi is energy and privatization expert. He could be reached at roudi.baroudi@yahoo.com