The cost of no reserve

In light of accelerating geopolitical shifts in the region and the fragility of energy markets, securing oil supplies has become a fundamental element of national security and economic stability. Strategic oil reserves are considered emergency stockpiles used by states to confront sudden supply disruptions resulting from political crises, natural disasters, or bottlenecks in supply chains.

These reserves provide a time buffer that allows for maintaining the continuity of vital sectors, limiting market disruptions, and gaining time to reorganize supply sources. However, they remain a temporary solution for absorbing shocks rather than a long-term substitute.

When and why strategic reserves are used

Strategic reserves are used in cases of geopolitical crises, as is the case today with the closure of the Strait of Hormuz by Iran, as well as during natural disasters, price fluctuations, and economic crises. In recent years, their use has expanded as a rapid tool for crisis management.

Globally, industrialized countries possess large and organized reserves, particularly the G7 countries and China, while some oil-producing Middle Eastern countries rely on spare production capacity as an indirect alternative to strategic reserves, reflecting varying levels of reliance on strategic storage among countries.

Lebanon and the energy security crisis

Lebanon is among the countries most exposed to supply disruption risks, due to its near-total reliance on imported petroleum products and the absence of an actual strategic reserve. The currently available stock does not exceed an operational reserve covering a short period ranging between 12 and 15 days.

This reality places the country in a position of multiple vulnerabilities, most notably full exposure to regional and international crises, high sensitivity to price fluctuations, and limited capacity to manage emergencies, especially given Lebanon’s complete dependence on oil imports.

Existing infrastructure, an untapped opportunity

Despite the structural challenges facing Lebanon’s energy sector, the country still possesses strategic assets that can be built upon to develop a sustainable energy security policy, foremost among them the oil facilities in Tripoli and Zahrani. These two facilities form a physical and logistical base that can be rehabilitated and expanded, allowing Lebanon to move from a state of fragility to a more stable and effective position in managing its oil resources.

Tripoli facilities: A frozen investment opportunity

In the north, the Tripoli oil installations extend over an area of approximately three million square meters and include the old refinery and its associated sites. In 2018, an attempt was made to reactivate the facility through an investment contract with the Russian company Rosneft, aimed at transforming it into a modern storage hub by building new tanks and increasing its capacity to approximately one million barrels. However, the project was not completed following the termination of the contract, leaving the facility without actual investment despite its significant potential.

Zahrani facilities: Expandable capacity in the south

In the south, the Zahrani facilities cover an area estimated at around 2.2 million square meters and include an oil terminal and a refinery that historically received oil through a long regional pipeline. The current storage capacity of the facility is about 150,000 tons of petroleum products, with the possibility of increasing it to around 500,000 tons in the event of rehabilitation and expansion.

The strategic value of these two facilities lies in several interconnected factors, most notably the balanced geographic distribution between the north and south of the country, logistical readiness to receive and store oil, and the possibility of rehabilitation at lower costs compared to building new facilities from scratch. These factors make them a fundamental pillar for any national project to establish a strategic oil reserve.

Current capacity and expansion potential

In terms of storage capacity, estimates indicate that Lebanon’s current capacity stands at around 480,000 cubic meters, equivalent to approximately three million barrels. However, this capacity is not fully utilized and suffers from aging infrastructure and damage caused by wars and neglect.

In contrast, this capacity can be significantly increased through phased rehabilitation and expansion plans, reaching about 1.5 million cubic meters in an initial phase, enough to cover consumption for 30 to 45 days, and then exceeding two million cubic meters in an advanced phase, providing reserves of up to 60 days.

The economic cost of strategic storage

Economically, establishing a strategic reserve requires significant investments divided into two main components: infrastructure and the cost of filling the reserve. While the cost of building or rehabilitating storage tanks globally ranges between $100 and $300 per cubic meter, the cost of rehabilitation in Lebanon can be estimated between $50 and $80 million, with medium expansion ranging between $180 and $300 million, reaching $500 million in an advanced scenario.

However, the most significant cost remains the purchase of the oil itself. Storing around 10 million barrels at an average price of $80 per barrel requires an investment of approximately $800 million. Thus, the total cost of the project ranges between $700 million and $1.4 billion, highlighting a notable paradox where the cost of the stock sometimes exceeds the cost of infrastructure.

Three scenarios for implementation

Based on these data, three scenarios can be envisioned for implementing the project in Lebanon: maintaining the current situation at zero cost but with high risks, adopting a limited reserve covering between 15 and 30 days and providing partial protection, or moving toward establishing a fully integrated strategic reserve covering between 30 and 60 days, which is the most costly option but also the most effective in enhancing economic and security stability.

To ensure the success of this project, a realistic implementation model emerges based on a gradual timeline for building the reserve, alongside adopting transparent and effective partnerships between the public and private sectors to reduce the financial burden on the state treasury and benefit from the dynamism and expertise of the private sector. A hybrid model combining a government reserve and a mandatory reserve for importing companies can also be applied.

Additionally, leasing storage capacity can be utilized as an additional source of revenue. This also requires establishing a clear institutional framework through an independent national authority to manage the reserve, a transparent system for releasing stocks, and a precise definition of emergency situations.

A regional opportunity for Lebanon

In addition to all this, the rehabilitation and expansion of the Tripoli and Zahrani refineries open a new horizon for Lebanon at the regional level. After developing their infrastructure, these refineries can operate as strategic centers for oil storage and redistribution, linking Lebanon’s strategic reserve to Mediterranean markets.

This would allow Lebanon to participate in oil export operations to neighboring countries, attract new investments in the energy sector, and strengthen its role as a regional logistical and supply hub.

Beyond domestic needs: A strategic role

At a broader strategic level, the importance of this project is not limited to meeting local demand but extends to the possibility of transforming Lebanon into a regional center for oil storage and redistribution in the Eastern Mediterranean, contributing to attracting investments and enhancing its position within regional supply chains.

However, achieving this ambition remains contingent on implementing deep institutional reforms and ensuring a minimum level of political stability, as two essential conditions for any sustainable progress in the energy sector.

Strategic oil reserves represent one of the most important risk management tools in the modern energy world. While advanced countries possess integrated systems, Lebanon remains in a fragile position due to the absence of such reserves.

However, the available data, from existing infrastructure to a distinguished geographic location, provide Lebanon with a real opportunity to build an effective system within a reasonable timeframe.

Although the cost may reach around one billion dollars, it remains limited compared to the economic and social losses that could result from supply disruptions in a country already suffering from structural fragility.

Accordingly, investing in strategic oil reserves is not merely a technical option but a sovereign decision that reflects the state’s ability to protect its economy and ensure its continuity in the face of crises.