Lebanon – Corruption:
According to Transparency International’s yearly report, Lebanon, with a score of 30 points, is considered among the 50 most corrupt countries in the world, ranking 128th out of 174 countries. Corruption is widespread, particularly in the public sector. But deeply-rooted corruption should not necessarily deter investments. It, however, means that corruption should be taken into account, as shady practices may be encountered at every level of dealings: legislation, nominations and appointments, public tenders etc. Transparency and accountability remain relative, as evident by repeated failures to prosecute people involved in corruption scandals.
The high salaries allocated to the Petroleum Administration’s board members by a government decree on 27/12/12, which has stirred controversy across the political and social spectrum, have been partly motivated by a will to confront possible corrupt practices and to cement the board members’ loyalty.
Foreign diplomats are increasingly bringing up the issue of transparency in the emerging oil and gas sector. After EU Ambassador Angelina Eichhorst and UK Ambassador Tom Fletcher [see “Lebanon – Good governance” in our 17/12 weekly roundup] it was US Ambassador Maura Connelly’s turn to address the issue during her meeting on 04/01/13 with Energy Minister Gebran Bassil, during which she “encouraged the Ministry’s continued commitment to implement fair, transparent regulations to develop the energy and water sectors.” Lebanese civil society has yet to catch up, but is expected to become more active once foreign funding of good governance and anti-corruption initiatives tailored to the oil and gas sector starts flowing.
Lebanon – Internal politics:
In a televised speech on 03/01/13 focusing on the Syrian crisis and the influx of refugees to Lebanon, Hezbollah leader Hassan Nasrallah also addressed other issues the party considered a priority, including the protection of Lebanon’s oil and gas wealth. He commended the government for adopting a series of decrees regulating offshore activities in its 27/12/12 meeting, and described the reserves as a national and historic opportunity to solve the country’s socio-economic problems, but one that comes with more potential danger from Israel. He called on the State to formulate a national strategy to defend the country’s resources, and added that if “you want to leave it up to us, we are ready to do whatever is asked of us to do. But if you don’t want the people to bear the responsibility on their own, then you must devise a national strategy to protect the country’s wealth. Again, we are ready to take up the responsibility, and we won’t ask for a share in return.” Nasrallah made it clear then that his party would only act in case the State does not rise up to the challenge and left it for the “people” to protect the country’s resources (thereby implying that he draws his legitimacy from the “people”).
Reactions to the speech were quick. Future Movement MP Mohammad Kabbara strongly criticized Nasrallah and rejected his offer to protect Lebanon’s resources. Kabbara, a staunch opponent of Hezbollah and Iranian influence, accused Nasrallah of scaring away international oil companies and only leaving the door open for Iran and other “resistance States”. He added that “we don’t want this oil if you will protect it with your weapons”. MP Atef Majdalani also slammed the speech [Link in Arabic], saying that “we either have to recognize that the State is the only side that is entitled to protect us or the country would be divided and each part would be responsible of managing its own affairs.”
In a previous analysis published by MESP in June 2012 [Link in French. Click here for the English translation], we argued that in the absence of a national defense strategy, Hezbollah, which possesses an arsenal that is far more relevant than that of the Lebanese army for such scenarios, would step up to defend the country’s resources. We concluded by saying that, unless advanced technologies are made available to the Lebanese Army, the security of offshore installations should be proposed as part of a package-deal by companies and countries interested in the exploitation of Lebanese gas.
Lebanon – Licensing process:
On 27/12/12, the Lebanese cabinet adopted a series of decrees organizing offshore oil and gas exploration [Click here for our Flash Update on the subject], including the launching of the first licensing round for drilling rights. Interested companies can start applying for the qualifying round on 01/02/13, a list of pre-qualified companies will be announced by 21/03/13 and will be invited to submit their bids starting 02/05/13.
The decree setting the monthly salaries of the Petroleum Administration’s board members drew a lot of criticism prior to the cabinet meeting, as news of the particularly high salaries and entitlements leaked to the media. It stirred intense debate during the meeting (during which it was decided to bring them down from around $24,000 to around $16,666, in addition to a compensation for an imposed 2-year suspension of work in the same field, following the completion of their mandate at the Petroleum Administration) and continues to do so more than two weeks afterwards. Fellow cabinet members, MPs, political parties and movements, unions as well as public sector employees etc. have all voiced criticism of the government’s decree [All links in Arabic]. It’s worth to note that although these wages are not surprising, and are, in fact, on par with industry standards, their adoption comes at a time of economic crisis and coincides with the repeated failures of the government to adopt a new salary scale for public employees.
For more information, please refer to our flash update: “Lebanon: Cabinet approves first licensing round for offshore drilling, adopts regulatory decrees.”
Lebanon – Licensing process:
Following the cabinet meeting on 27/12/12, which marked the launching of the first licensing process, Lebanon – as evident from the frequent statements by Energy Minister Gebran Bassil and his advisors – is expecting a big turnout. Several companies have already expressed their interest. Among these are two Lebanese-owned companies, Petroleb and CC Energy Development (associated with the Consolidated Contractors Group of Companies, CCC Group), as well as British-based Cairn Energy, UAE’s Crescent Petroleum, US-based Marathon Oil and Dutch firm Oranje-Nassau Energy. In an article published on 02/01, UPI reported that as many as 40 international companies are expected to bid for drilling rights.
Lebanon – Environment:
Just as the issue of good governance in the petroleum sector has not been seriously tackled yet, the same could also be said about environmental concerns. The 2010 Offshore Petroleum Resources Law only provides a broad framework, but indicates that Lebanese legislation on the protection of the environment will be applied to petroleum activities conducted in Lebanese waters and gives the Ministry of Environment a central role in all aspects related to the environment. However, the Ministry does not seem to have a clear vision on how to address the issue. In a press conference on 17/12/12 intended to outline what he describes as his ministry’s achievements in 2012, Environment Minister Nazim Khoury, listed a wide-range of measures and activities that have been implemented in 2012, and spoke of his ministry’s upcoming activities. Only a few words were devoted to the oil and gas sector, which reveals a certain confusion on how to approach the subject. In a couple of sentences, he noted that the ministry sought to reconcile energy-related projects with environmental considerations and said that an environmental assessment for the oil sector has been conducted, without providing any further details (no mention of the report could be found on the ministry’s website). Khoury also said that, in 2013, his ministry will coordinate with the Petroleum Administration on all matters related to the environment, again without providing further details.
Lebanon – Maritime border dispute:
According to rumors relayed by Lebanese daily Addiyar on 06/01/13, Cyprus, which is mediating to settle the maritime border dispute between Lebanon and Israel, is allegedly seeking British Petroleum’s help in the negotiations. Lebanon seems to object to trilateral negotiations and prefers indirect contacts. Regardless of the accuracy of this information, MESP chose to mention it nevertheless, ahead of the visit of the President of Cyprus, Demetris Christofias, to Beirut this week (09-11/01/13).