Lebanon: The Oil & Gas Report, April 21, 2014


Presidential election: Samir Geagea, first candidate to include oil & gas in electoral program

The Lebanese Parliament will convene on April 23 to elect a new President. However, no progress is expected to emerge until the last minute of President Michel Slaiman’s mandate (which expires on May 25), or, most likely, even afterwards.

In the coming weeks, MESP will shed light on how presidential candidates will address the oil and gas file. It must be noted that the Taef accord, which put an end to the civil war, stripped the President of major powers in favor of the Prime Minister and the Council of Ministers. According to the Constitution, the executive power is entrusted to the Council of Ministers.

A few days ahead of the first voting session, potential candidates abound but only one has officially presented his candidacy: Samir Geagea. The March-14 affiliated Lebanese Forces leader also presented his program on April 16. Geagea referred to the development of oil and gas resources as a potential blessing to the economy, and proposed the creation of a free trade zone “specialized in derivative industries or those related to the oil and gas sector”.

The 24-page document includes a paragraph devoted to oil and gas, insisting on transparency and good governance to avoid turning this wealth into a curse, and the need to establish a sovereign wealth fund and ensure its independence.

[We are reproducing the text as is, although translation is rough and, at times, does not reflect the actual Arabic text]:

This newfound wealth, which is oil and gas, is a blessing bestowed upon the Lebanese economy. And to prevent it from turning into a curse, because of the quota system and clientelism, I am truly determined to protect this wealth with all my might, by adopting extremely transparent standards and the rules of good governance. This will be applied by contracting mining companies, and establishing a sovereign fund entrusted with the sector’s revenue, as well as ensuring this fund’s independence and exclusion from all political conflicts, at all costs.

Notably absent is the reference to the State as the sole actor responsible of protecting this wealth and ensuring security (a line Geagea has often used in the past as an answer to Hezbollah leader Hassan Nasrallah’s claims that his party could contribute to protecting the oil and gas wealth).

[hr]
Differences between Berri and Hochstein prevent progress on border dispute

Local media reported on the differences between Speaker Nabih Berri and U.S. Deputy Assistant Secretary for Energy Diplomacy Amos Hochstein, perceptible during the American diplomat’s last visit to Beirut on March 31, confirming our initial assessment [see Amos Hochstein in Beirut, backed by a smart communications strategy… but differences with Berri persist, in our April 07, 2014 report].

Failing to win over Berri’s backing for his latest proposal to settle the maritime border dispute between Lebanon and Israel is a major flaw in Hochstein’s approach. When it comes to such issues, Berri does not only speak for himself, he must be viewed as the representative of the Shiite duo, which includes Hezbollah.

Hochstein may find it useful to postpone his next visit until after broad agreements have been made locally. The agreement that allowed the formation of Tammam Salam’s cabinet after almost a year without a fully functioning government was a limited agreement, focusing on certain issues. This explains progress made on certain fronts (security situation), but not on others (socio-economic issues, oil & gas decrees etc). The big test is the upcoming presidential election, which will not unfold until a broad agreement among the most influential parties is made. In the meantime, Hochstein’s priority should be to reopen channels with Berri.

[hr]
Lebanon: the ministerial committee held so far a total of… one meeting

The ministerial committee tasked with studying the two missing oil and gas decrees held its first meeting on April 9, in presence of the members of the Petroleum Administration (although it was asked to present its preliminary findings during the cabinet meeting held on April 8). No major progress was made during this first meeting, and participants agreed to push back their second meeting to April 23. In the meantime, Speaker Nabih Berri decided to convene the Parliament on April 23 to elect a new President, and since several members on the ministerial committee are also MPs, they may decide to reschedule their meeting.

[hr]
Lebanon: Spectrum begins phase 2 of onshore surveys

Energy Minister Arthur Nazarian launched the second phase of the onshore 2-D surveys conducted by Spectrum on April 10, after promising results were recorded during the first phase of the project. Spectrum, which was not fully satisfied by working conditions during the first phase, will carry out its survey along the coast and in parts of Mount Lebanon and is expected to hand over the final report of the first phase to the Ministry of Energy by the end of April. The Petroleum Administration completed its work on the onshore petroleum resources draft law back in January 2014. The existing law dates back to the 1930s and does not provide an adequate framework to conduct modern petroleum activities, while law 132/2010 is limited to offshore petroleum activities. The text still needs to be discussed and approved by the relevant authorities.

[hr]
ENI’s image in Lebanon tainted by a corruption case

A curious case rocked the Lebanese judiciary in the past few days. Italian prosecutor Fabio de Pasquale arrived to Beirut on April 14 to follow-up on a lawsuit involving Farid Bedjaoui, a Franco-Algerian businessman who also happens to be a relative of Algeria’s former Foreign Affairs Minister Mohammad Bedjaoui. Bedjaoui is accused of acting as a conduit for bribes from Saipem, a subsidiary of Italian oil company Eni, to Algerian authorities in order to help the Italian company win a series of oil contracts worth over $10 billion, between 2007 and 2010.

The corruption affair, in which ENI (one of 12 companies shortlisted for Lebanon’s first licensing round as operator) appears to be implicated, has attracted the interest of local media.

This case highlights the importance, for ENI and other companies interested in getting involved in the energy sector, of establishing a monitoring system and a regular evaluation of the company’s image with a special attention to communications, and particularly crisis communication.

Note that the purpose of de Pasquale’s visit was to follow-up on two judicial cases, the second involving Italian senator Marcello Dell’Utri.

[hr]

Previous issues:

Lebanon: The Oil & Gas Report, April 07, 2014
Lebanon: The Oil & Gas Report, March 24, 2014
Lebanon: The Oil & Gas Report, March 10, 2014
Lebanon: The Oil & Gas Report, February 24, 2014
Lebanon: The Oil & Gas Report, February 10, 2014