Anti-corruption law needed for oil and gas

Zahle MP Joseph Maalouf discusses updates on a bill he’s sponsoring

MP Joseph Maalouf drafted the proposed anti-corruption law for the oil and gas sector

Almost a year has passed since Executive first reported on a new draft law aiming to stamp out corruption at various points along the life cycle of an oil and gas project. It is an understandable delay given that parliament has only ratified emergency laws and, after an over three year wait, cabinet has yet to pass two decrees needed to move Lebanon’s first offshore licensing round forward.

An early July meeting between the country’s Speaker of Parliament Nabih Berri and leader of the Free Patriotic Movement Gebran Bassil, whose party has dominated the early stages of developing the oil and gas file, raised concerns over a possible ‘back-room deal’ [see cover story] over the sector’s future and, possibly, the fate of potential contracts and hoped-for revenues. If the need for strong anti-corruption rules for this sector was not apparent before, it is now.

That there is suspicion over the so-called deal between Berri and Bassil hardly comes as a surprise. This is an industry that has proven mostly opaque in much of the world and Lebanon is a country that, according to a ranking by global watchdog Transparency International, is deemed mostly corrupt. The anti-corruption law, proposed by MP Joseph Maalouf in 2015, promises an injection of transparency on the awarding of bids and subcontracting, as well as revenues flowing to the government’s coffers.

In an interview discussing updates to the draft law, Maalouf tells Executive he will have a formal draft prepared by the end of July to present to the Parliamentary Committee on Public Works, Energy and Water for review and, he hopes, approval. Upon committee approval the proposed legislation would be sent to other committees and joint committees for discussion. Speaker Berri, Maalouf told Executive last year and again now, is very supportive of the anti-corruption law. He hopes that high priority status might be enough to champion the bill as emergency legislation.

E   In the past, the indication was that Speaker Berri wanted the offshore blocks to be smaller and that he wanted to offer all of them at once for bidding. Prior to this interview, we were told that the Speaker has changed his mind and agreed to the blocks as the size that they currently are and agreed to what they call gradual licensing. What’s the distinction?

There’s a difference between gradual licensing and offering the blocks. You can offer all ten blocks and then you license them gradually based on what prequalified companies come back with and based on the terms around each block, and on the various 3D scans that were done. So you would determine based on which company is interested in which block to develop certain prioritization criteria and you would license the blocks accordingly.

E   On the excitement where everyone thought the decrees would be passed by the end of July – our impression has been that it may not be a deal per se but merely to present a positive outlook. Would it be unfair, from an outsider’s perspective, to suspect that there was some sort of under the table handshake?

You’re talking about splitting the pie. Regardless, there are some issues that need to be tightly monitored, there have been some rumors that were circulating around some companies that were squeezed in after the pre-qualification round. Our role as parliament is to monitor that and track it properly to make sure that all the laws that are being enacted are respected.

Hopefully the law we’re proposing will be as foolproof as possible to minimize and eliminate any possibility of corruption through total transparency in the whole system

E   Last year we discussed an anti-corruption draft bill for the sector. Has any progress been made to formalize this legislation?

It is a proposal of a law that I’m working on with the Lebanese Petroleum Administration whose members have been extremely collaborative. I’m working with a subcommittee now on refining the proposal and what we did was a full-fledged process analysis from the time the blocks will be offered all the way through exploration, production and dismantlement – the full life cycle. We took each step in each of the phases and analyzed how they could be jeopardized and how corruption could seep in. We’re creating transparency measures at each step of the process to make sure that we can control it. Anybody with dubious intentions trying to take advantage of the system is at an advantage because they will always look for loopholes somewhere, somehow. Hopefully the law we’re proposing will be as foolproof as possible to minimize and eliminate any possibility of corruption through total transparency in the whole system.

E   We’ve seen Member of Parliament Samy Gemayal advocating for transparency measures such as the Extractive Industries Transparency Initiative (EITI). Is that enough and does your draft law stipulate reporting requirements?

With all due respect the EITI is not enough for us. Many of the components that EITI suggests, from our perspective, should be mandatory. Divulging information and ensuring transparency will be mandatory in the law that we’re proposing – what we’re doing goes beyond any existing law globally. It’s in a similar direction, but we’re going beyond on a process monitoring level. The intent was there [last time Executive spoke with Maalouf about the proposed law in September 2015] and the actualization of it has become much clearer.

E   How deep does the proposed law go – to service providers and subcontractors?

Subcontracting is the game. That’s where the EITI proposes some things that are useful, but they’re not enough. In terms of going down to the second tier or third tier, that’s where we need to track contractors and subcontractors. [We need specific transparency measures] mandated by law. We’ve done the full fledged process analysis for the whole project life cycle – from granting exploration licenses all the way through dismantlement of facilities. Each step is now much clearer and the points are very well defined.

Jeremy Arbid

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

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