By Scott Belinksi

While the Eastern Mediterranean is well known for its major (and underexploited) gas reserves, Lebanon is the latest country in the region to join the oil rush, after Egypt’s fitful entry into the market and Israel’s more straightforward path to exporter status. Seismic surveys
in 2013 estimated Lebanon’s offshore fields to hold 96 trillion cubic
feet of gas and 850 million barrels of oil. On January 27th, the
government finally opened the bidding for five offshore blocks in a
first licensing round, after a three-year delay brought upon by
political instability.
The fractious Lebanese government hopes
that these energy reserves and the wealth that should come with them
will alleviate the country’s notorious power shortages and budget
deficits. But, history is littered with examples of fragile countries
going completely off the rails because of the warping effects oil has on
their economies – will Lebanon follow suit or can Beirut dodge the
resource curse? Michel Aoun, who was elected President at the end of October, after a grueling 29-month standoff, vowed
to use the fund for the good of the Lebanese people, financing
development projects and revamping ailing infrastructure. In this, his
government wants to follow the example of developed economies that have
the advantage of better governance and economic planning, greater
regional security, and long-established transparency practices. However,
even if Lebanon’s estimated reserves turn out to be as substantial and
as profitable as its leaders predict, replicating that success won’t be
an easy feat.
For the time
being, the government is off to a good start. To send a message that it
will handle the future proceeds from exploiting its reserves
responsibly, Beirut is pushing a plan that would require all
oil-generated proceeds be deposited into a national sovereign wealth
fund (SWF), which emulates the path followed by Norway and more recently
by Saudi Arabia. Norway, the country that manages the world’s
largest wealth fund, sets the gold standard when it comes to
transparency. The Norwegian Government Pension Fund Global (GPFG)
publishes online details of every investment it makes to uphold its
culture of political trust. As former fund supervisor Martin Skancke put
it, the trust the fund enjoys comes down
to “relatively high levels of equality and cultural homogeneity.” Even
with unexpected bumper profits, Nordic frugality and trust in government
meant the public has thus far been content to put hundreds of billions
into the fund and let the money stay there.