Lebanon’s murky petroleum business

How wasta, uneven partnerships and an international web of shell companies characterize the country’s new oil and gas sector

This Executive investigation into Lebanon’s oil and gas companies is part of a special report on the sector. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.

 

“If you want to hurt me, I can hurt you back,” Antoine Dagher tells Executive, laughing as he tries to keep his name out of this article. A former communications manager for Petroleb, one of three Lebanese companies prequalified to bid in the first offshore licensing round, Dagher belatedly clarifies, “I’m not threatening you.” Petroleb still uses Dagher as a consultant, but in early September, so did the Lebanese Petroleum Administration (LPA). Executive had wondered whether or not this was a conflict of interest, which Dagher insisted it was not. 

Apex Gas Limited, is actually registered in Hong Kong, not Beirut, through a process tailored to keep shareholders and directors anonymous

This is only one of the complications encountered in trying to pin down the details about the three ‘Lebanese’ companies — out of a total of 46 — prequalified to participate in Lebanon’s nascent oil and gas sector. A company identified by the LPA as a ‘Lebanese’ prequalifer, Apex Gas Limited, is actually registered in Hong Kong, not Beirut, through a process tailored to keep shareholders and directors anonymous. Taken together, these experiences offer a fresh perspective on the murky nature of the oil and gas industry, and how instead of starting off with a clean slate, it appears Lebanon’s new petroleum sector is already sliding into the shadows.

Experience needed, unless you have a partner

Both Petroleb and Apex have no previous experience in the industry. Only the third prequalified Lebanese business, CC Energy Development (CCED), is an established oil and gas company, having drilled and produced oil onshore in Oman since 2010. But the lack of experience did not stop Petroleb and Apex from making the cut. According to the 2013 decree governing the prequalification process, companies that don’t meet the eligibility requirements — including previous oil or gas production experience — can partner with companies that do meet the requirements to jointly prequalify as one legal entity. This is precisely what both Petroleb and Apex did. Petroleb paired with Bermuda based GeoPark, which is active in South America, and Apex teamed up with the UAE’s Crescent Petroleum, which got into the oil and gas game in the early 1970s. 

Both Apex and Petroleb tell Executive they plan to branch outside of Lebanon, but there is no evidence either has done so yet. Petroleb’s Chief Executive Officer Salah Khayat tells Executive, “Petroleb is active outside Lebanon and is considering various [exploration and production] assets, while building its technical team.” Chief Operations Officer Naji Abi Aad says an announcement of the company’s work outside Lebanon is forthcoming.

Friends in high places

Karim Kobeissi, Petroleb’s lawyer, was an advisor to the Ministry of Energy and Water in 2008 and helped write the 2010 offshore exploration and production law

In addition to serving as Petroleb’s chief executive, Khayat owns 50 percent of the company, which was founded in September 2011, according to papers it filed with Lebanon’s commercial registry. Khayat is the nephew of Tahseen Khayat, owner of Al Jadeed television and founder of the Tahseen Khayat Group, a sprawling conglomerate with businesses in engineering and contracting, publishing, printing, hospitality and leisure, and sales and distribution in both Lebanon and abroad. Omar and Bashar Khayat evenly split the remaining 50 percent of Petroleb’s shares. Karim Kobeissi, the company’s lawyer, was an advisor to the Ministry of Energy and Water in 2008 and helped write the 2010 offshore exploration and production law.

According to the company, its deep connections offer excellent benefits to its bidding partner, GeoPark — an important point given Petroleb’s dearth of experience in oil and gas. COO Abi Aad says, “Everywhere in the world, if you have good connections and a strong position with the main decisionmakers you have [a] good chance, but you have to have the technical requirements. We have very strong connections in the country and good relationships, we know everybody in the country.” He concludes, “You can be sure GeoPark finds us useful.” 

Hong Kong connection

But while Petroleb is up front about its business model, information on Apex is much harder to come by. The company is not registered in Lebanon, nor does it have a website. A booklet produced by the LPA offering information about all  46 prequalified companies is dead silent on Apex, the sole omission.

Apex’s true owners, UniGaz CEO Mahmoud Sidani and Chamber of Commerce, Industry and Agriculture of Beirut and Mount Lebanon Chairman Mohammad Choucair, aren’t on the documents

Apex was registered in Hong Kong in April 2012, company lawyer Tarek Nahas confirms. Nahas says he chose Hong Kong as a place of registration — as opposed to Lebanon — so as to be governed by English law in order “to have a clearer legal framework.” Asked why the company’s papers, which Executive purchased, do not list any Lebanese nationals, Nahas says the company’s true owners, UniGaz CEO Mahmoud Sidani and Chamber of Commerce, Industry and Agriculture of Beirut and Mount Lebanon Chairman Mohammad Choucair, aren’t on the documents. Both Sidani and Choucair confirmed they are partners in Apex, but only Sidani would grant a more in depth interview.

Apex is benefiting from a Hong Kong secrecy provision that allows owners to pay yearly fees to have nominal directors and shareholders listed on paper to “keep your true director identity completely confidential,” as a Hong Kong based incorporation services firm puts it. On paper, the director of Apex is Roger Leo A. Carino and the company’s sole shareholder is Abacus (Nominees) Limited. A conversation with Intercorp, another Hong Kong based company registration service provider, reveals that both Carino and Abacus are strawmen in place to keep Sidani and Choucair publicly distanced from the company. Carino is also listed as the director of Apex Oil and Gas Limited, another company registered in London. Reached by phone, Carino says he doesn’t have any paperwork in front of him and is preparing to travel, so he cannot answer Executive’s questions. He did not reply to an email Executive sent seeking clarification. The sole shareholder of Apex in London is Aries Global Investments, registered in Curaçao in the Dutch Caribbean. Nahas says he knows nothing about the Apex in London, despite the exact same names and directors.

Sidani could not explain why Apex chose to pay money to obscure its real owners from public view, referring Executive back to Nahas, who did not respond to a follow up interview request. 

When set up in 2012, Apex was worth a scant HKD 10,000 ($1,290), and nothing more recent has been publicly disclosed 

Unlike Petroleb’s Abi Aad, Sidani did not cite “connections” as the benefit his company brings to its partnership with Crescent Petroleum, but he did get defensive when first asked. “We are investors, and [as] Lebanese investors, it’s our right to put our money in Lebanese gas. [It’s] as simple as that.” Pressed on what Apex brings to the table, Sidani says, “They want us to share the risk, because this is like bingo, you might spend $400 million on four wells and not find any gas. So we are splitting the risk.” It’s unclear, however, just how much risk burden an apparently tiny company — when set up in 2012, it was worth a scant HKD 10,000 ($1,290), and nothing more recent has been publicly disclosed — can shoulder compared to a company like Crescent, which is worth at least $500 million.

But this is just one question in a sea of uncertainty that encompasses both Apex and Petroleb — and raises questions about the transparency of the entire sector. When asked the simplest of questions, to confirm that Apex is registered in Hong Kong, the LPA declined to answer.

Matt Nash

Matt is Executive's Economics & Policy Editor. He has been reporting on Lebanon since 2007 with a focus on oil and gas, policy and legal matters.

Jeremy Arbid

Jeremy is Executive's in house energy and public policy analyst.

10 Comments

  1. Antoine Dagher said:

    I am very impressed by the level of freedom that our Lebanese media enjoy, and by the writers of this piece. It certainly takes a lot of courage to cover such important and sensitive topics. But unfortunately, courage is not enough.
    Being one of the people mentioned in this article, I am under the obligation to comment in good faith and without prejudice. The purpose of my comment is not to reply to what is written. It is rather to help improve the quality of the writing skills and to see a more valuable input from a respected magazine like “Executive”. After all, our emerging oil and gas sector needs an alert media, but with more professional coverage.
    Based on my observations in the part that concerns me, I noticed a clear lack of some basic journalistic skills. In my humble opinion as a trained journalist, the work raises very serious questions about its intended value. The article simply violates some basic rules of best practice in journalism , and may be viewed as a biased and prejudiced piece of good English literature.
    For example, in describing my role as a free-lance consultant and the nature of my business with two of the mentioned organizations, the information was completely inaccurate; regardless of whether those statements were positive or negative toward my activities.
    Providing accurate and well researched information is one of the most important rules in journalism, everyone knows. The writers of the piece did not even take the trouble to ask me for a formal interview. They rather based an argument on fragments from informal discussions –including jokes, which I had with them and with their managing editor. This level of inaccuracy makes me wonder, as a reader, about the credibility of each and every piece of information across the article.
    On the professional level, the writers clearly admitted that I explicitly asked them for anonymity. Any Journalism novice knows that one of the basic rules of this trade is to respect the will of your source, especially when it comes to explicitly asking for anonymity. Violating this rule is obviously unethical and in some countries may be considered illegal.
    Additionally, the style and tone of the statements made, make me wonder as a reader about the objectivity of the whole piece. I am not sure if I was the only one who felt that the article was written with prejudice. No one fact of wrong-doing could even be presented and proven against anyone of the people and organizations mentioned.
    Even though I am trying to limit my comments to the part that concerns me only, without trying to discuss what is written about the companies, investors and organizations, I could not help noticing that the writers admit that all pre-qualifications were made according to the Law. Even though some interesting questions were raised, those questions stayed unanswered.
    Everyone in the industry knows that the requirements for pre-qualifications for the bid rounds in Lebanon were very strict, transparent and clear. They may still be available on the LPA’s website for public viewing. However, if our writers disagree with the laws of the land, they better write articles about the legislative process and the people who issued the law. They may probably want to ask our law makers to deprive Lebanese investors from their right to participate in developing our very own natural resources!
    I also noticed that the third mentioned company, CCED, was not completely covered in the article. Why? I would have loved to read more about the owners of the company, its history and experience.
    To my knowledge this company is a branch of the well-established and highly connected CCC construction conglomerate. Well, is it registered in Lebanon? Which countries does it operate in and under which names? How accurate is to label it as an established and experienced “oil and gas” company? At the time of the prequalification CCED had had almost two years of experience in “onshore” drilling. How experienced is it in deep offshore drilling? I would love to read more about this company’s affiliations in Lebanon, and its legal ownership and structure. But I do not really know why the writers blacked-out such information.
    Finally, I would like to thank “Executive” and its writers for trying to do a good job. But I truly hope that in their coming articles they will show more integrity and professionalism and be more successful. I think Executive should consider more journalism training for its staff!

  2. Eric R said:

    Hi Antoine. You don’t seem to address any of the things that are quoted and attributed to you. So effectively, you do not deny the tone and message that you’ve given to this article’s authors. Perhaps you should start with that instead of commenting on “basic journalistic skills” and alluding to a regime of fear-mongering in the Lebanese media. Trying to shrug off the quotes as “jokes” all the while calling the authors courageous for writing this article only gives me the impression that you DO have something to hide.

    Also, an uncooperative “source” is not likely to stay anonymous at all with that kind of attitude, you’re not some kind of Manning-esque whistle blower, in fact, you’re quite far from it.

    • Antoine Dagher said:

      Hi Eric, So you seem to agree that the article is weak and cannot be credible! And you suggest that “uncooperative” sources should be “punished” by depriving them from their right for anonymity… Well, I have no comment on this. But it is certainly interesting to know. I rest my case…

      I don’t know what “tone and message” you are referring to in regards to the authors. They are both good colleagues and friends of mine. My comments are not personal in any way. I only expect professional articles based on facts, not on unfounded accusations, especially from a magazine like Executive.

      By the way, please read the the text of the articles. it says it clearly that I did not threaten them, and that I disagreed with their assumptions and that the discussion took place as I was laughing (i.e. joking). So do I need to say more?

      Anyway if you still think that I need to say more, you need to give me good articles first.

      • Eric R said:

        > “If you want to hurt me, I can hurt you back,” Antoine Dagher tells Executive, laughing as he tries to keep his name out of this article. A former communications manager for Petroleb, one of three Lebanese companies prequalified to bid in the first offshore licensing round, Dagher belatedly clarifies, “I’m not threatening you.”

        The key word here is “belatedly”, which means that the authors had already sensed some threat from you as you said that.

        > And you suggest that “uncooperative” sources should be “punished” by depriving them from their right for anonymity…

        No, I suggest, rather, that since you gave just about 0 information, according to this article, then there’s absolutely no need for you to complain of anonymity. After all, there’s been no “smoking gun” or controversial opinion given from you. The moment you come up and say, theoretically “Oh yeah, this other company bribed the minister to do this or that” is the moment where anonymity is required, which in this case it is not.

        > So you seem to agree that the article is weak and cannot be credible!

        Not at all, quite the contrary. The article is supposed to kickstart and foster debate, and as far as the both of us are concerned, it’s doing just that.

        So again, regarding some claims you haven’t addressed, such as the purported conflict on interest. Indeed, in a country like Lebanon, it isn’t a stretch to assume that some corruption may (may) have been taken into account. Of course, I don’t mean to disparage you at all, I’m just questioning. Surely you’ll be able to put my doubts at rest.

  3. J. Mallah said:

    Instead of beating around the bush and responding to trivial issues in the article, it would be better off for Mr. Dagher to answer the question: How come he is a consultant for the Lebanese Petroleum Association AND Petroleb at the same time? The clear conflict of interest should open the eyes of relevant authorities in this country, which I hope they get their hands on this article quick.

  4. Antoine Dagher said:

    Hi Eric,
    Every time you try to reply to my comment you only prove my points in general, and maybe drive the reader to realize how some journalists can be abusing their “journalistic authority” to intentionally or unintentionally defame people because they were “uncooperative”, or because their writers could not get information from them, which can very well be due to the fact that those people simply did not have any information.

    You even went further allowing a magazine to selectively decide if and when people may be granted their rights! This is very dangerous, in case you do not realize it.

    You have chosen not to disclose your real name, by using a kind of abbreviation, which is some sort of seeking anonymity. This is something that I completely respect and will not ask you to reveal your true personality. In my book this is your right and I respect it. I only hope that you do not work for Executive, because your statements may put the magazine in a very uncomfortable situation.

    You mentioned that there is no need for me to “complain for anonymity”. Well it is me and only me who decides when and if I use my rights. However, If you read my first comment, I clearly said that my intention is not to reply to the article, and therefore to “complain” about anything in it, including anonymity.

    The reason is that, to me “the article simply violates some basic rules of best practice in journalism , and may be viewed as a biased and prejudiced piece of good English literature,” as I said. I have raised some serious questions though about the journalistic value of this article, and so far you completely failed to answer anyone of them, except for anonymity, which was done in a way that further condemns the article.

    You are stating for example that an argument was completely built on what the writers have “sensed”, and on unfounded “doubts”, and purported assumptions. Based on journalism best practice, the writers’ feelings, their doubts and their assumptions are definitely not enough to build an argument and publish it, unless you are writing an opinion piece. In such a climate of complete lack of professionalism, how do you want me to take any statement seriously, how do you want me also to believe any part in the article, and how do you want me give answers and information?

    As to the purpose of the article and its expected role in kick starting a debate, you have first to state the facts that should be well documented with evidence, cover all the aspects of the issue in a professional and objective manner, publish a balanced and unbiased article, and then kick start your debate. Then I will be ready to debate anything you want.

    By the way, thank you for “belatedly” stating that you don’t mean to “disparage” me at all. I truly appreciate that, all in good faith, and I hope you can see what I mean.

    • Eric R said:

      Hi Antoine,

      You can say what you want of any journalistic aspect or fault of this article, and yet you have yet to address the one fact the article says about you: that you are employed by 2 bidding companies and that you insist that there is no conflict of interest. Can you please address that?

      For your peace of mind, I neither work nor am I associated to Executive Magazine in any way, neither professional, personal or otherwise.

      Perhaps you can dispense with the deflections, answer the one question this article raises about you? If you are so taken by the allegations, sparse as they are, about you, perhaps you can try clarifying with the authors. As of yet nothing you’ve said puts me at ease.

      You don’t seem to realize how important the results of this process are to the Lebanese people. Are you genuinely surprised that you are under some measure of scrutiny? Really?

      • Antoine Dagher said:

        Eric,
        Please read the article. It never says that I was “employed” by two bidding companies! I wonder how you got this impression! I could not possibly take two competing clients, despite the fact that I am a free-lance independent consultant. Please read carefully my first comment. Even what was written in this regard in the article is not correct. I had the impression that you read my feedback on the level of accuracy, with an example about the part about me. I think this should finally put your doubts to rest.

        The importance of the journalistic aspect in this article, is that a badly written article, like this one, will certainly lack credibility, and give the wrong impression. Your impressions can be the perfect example. As a reader you should take this into consideration. shouldn’t you?

        My friend, I have a excellent reputation for my honesty, integrity, and professionalism. Everyone who worked with me knows this. And trust me, if I sense any corruption anywhere I will immediately distance myself, and when I get a solid evidence I will be the first to raise the flag. Until now, I never sensed any kind of corruption whatsoever in the oil and gas sector. I hope this convinces you. If it does, I think you owe me an apology! :-)
        I think enough is said. I really enjoyed our discussion.

  5. Antoine Dagher said:

    Mr. (Ms.?) Mallah,
    Well, I think the question is answered. You need to read my first comment where I clarified that the facts stated in the article were not accurate. Those facts were mostly about my activities as an INDEPENDENT Consultant in allegedly serving both Petroleb and the LPA simultaneously. This piece of information is simply not correct.

    Besides, I have concerns and doubts that there was an intention to mislead readers like you, unfortunately. I think it is time that Executive and the writers clear their names, and try to correct what has been done.

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