VALUE CREATION FOR CURRENT AND FUTURE GENERATIONS
As natural assets are created over centuries and are non-renewable, Lebanon has a moral obligation to create value from the natural wealth once extracted and hence manage the prospective resources in such a way to optimise revenues and maximise value creation within and across generations for the benefit of the Lebanese citizens.
One way to enhance the value of the prospective petroleum resources is through smoothing out exploration activities via a critically-thought gradual licensing strategy, which aims to strike a balance between finding a commercial discovery so to enable Lebanon to join petroleum producing countries on one hand, and to safeguard the value of the resources in future licensing rounds.
Another way that contributes to adding value as a result of petroleum resources development is through local content local content provisions. The regulations in place highlight local content with an emphasis on procurement on one hand and on employment and training on the other giving an opportunity for local businesses to take part in petroleum activities as subcontractors provided tenders are competitive and the quality of goods and services is upheld.
Regarding employment and training, Right Holders are required to employ and train Lebanese personnel whenever available, thus contributing to direct job creation. However, as the petroleum industry is a capital intensive one, petroleum activities mostly require vocational types of jobs which are linked to the timespan of a specific project.
Nevertheless, petroleum activities also generate indirect jobs beyond the direct contributions of the petroleum sector to the economy by linking it to other sectors, thus providing a sustained value creation through ripple effects across productive industries. More specifically, the prospective petroleum industry’s related activities could trigger a demand for Lebanese tradable products and services, which could translate into a higher disposable income that in turn could be invested in other productive activities in a diversified economy.
Another way to maximise value creation is through allocating the revenues – namely royalties, profit petroleum and taxes – in a Sovereign Wealth Fund (SWF) as stipulated in the Offshore Petroleum Resources Law (OPRL). The SWF characteristics is currently being studied so to identify its investment and saving strategies which are to account for the existing economic circumstances of the country and the stage of development achieved to date. The return on the SWF capital is to be invested in productive national economic activities.
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