To his admirers he is intelligent, principled and steadfast. To his adversaries he is uncompromising, avaricious and self-indulgent. All may be partly true of Minister of Energy and Water Gebran Bassil but, as he battles to maintain his position in any coming government, he certainly can’t be accused of being idle.
Rarely a day passes without a press conference covering some new development he is championing. During his tenure he has registered an impressive array of achievements; a new power plant is to be built at Deir Ammar; energy producing power ships are set to boost the grid while renovations are done on existing power stations; an extensive dam building scheme has been initiated; and even a solar roof for part of the Beirut River is in the cards.
On top of these achievements is the steady development of the oil and gas sector, which has transformed the ministry of energy and water (MoEW) into one of the most coveted positions in the cabinet. “This is an unprecedented step towards entering the oil and gas producing world,” exclaimed Bassil while announcing the 46 companies that successfully passed through the pre-qualification phase for the first offshore oil and gas exploration round last week.
However, the means by which these impressive advancements have been achieved raise important questions for those interested in trivial things such as transparency and good governance. The criticisms of Bassil’s stewardship of the hydrocarbons sector are extensive. Minister Bassil pushed the bylaws of the Petroleum Administration (PA) through the cabinet before sending them to the Shura Council – the body that checks the legal and constitutional veracity of government decrees – for prior review, as is required by law. The Shura Council subsequently raised a number of objections, which were blithely dismissed. Again the minister made a legal sidestep when he secured the cabinet’s approval on the petroleum activities regulations before the board of the PA was appointed. And finally, the PA is, of course, paid by the MoEW, which somewhat brings into questions the independence of the body as is enshrined in the 2010 law for the sector.
Warning signs
It is not just in the oil and gas sector that warning flags have been raised. Few things rouse Lebanese fervor as much as the state of the nation’s sporadic and expensive electricity supply. Currently Lebanon’s electricity demand exceeds supply by around 1000 Megawatts (MG). In June 2010 Bassil’s team at the ministry unveiled a comprehensive master plan, encompassing 42 projects to reform the sector. An initial series of schemes to boost generation capacity by 700MW at a price tag of $1.2 billion has been the defining success in this domain to date.
While significant and commendable strides have been made, the management of some of the major contracts once again raises questions over the competence of the ministry. “There is a complete lack of transparency. In many cases we were not allowed to look at the original [tender] documents. This is not acceptable,” opposition MP Ghazi Youssef complains.
From the $1.2 billion that Minister Bassil had wrestted from the government, $850 million was allocated to the construction of a new power plant at Deir Ammar as well as the addition of new reciprocating engines at the Zouk and Jiyeh power plants. The tender process, however, was bungled – leaving one consortium with its nose out of joint, projects delayed and doubts cast over the ministry’s engagement with the private sector on big-ticket projects.
The government launched the Deir Ammar and Zouk and Jiyeh contracts at the same time. The first to be awarded was for Zouk and Jiyeh – with the contract going to Danish firm BWSC for $348 million. Minister Bassil, however, was displeased with the decision and challenged it twice, for unclear reasons, at the Council of Ministers (COM) – insisting that a second company be brought on board. While the minister eventually had to back down, it took a further six months to agree on the contract when it should have taken two.
Having agreed that deal, the MoEW was left with $502 million from the allocated $850 million left for the Deir Ammar II project. The tender commission, based on the conditions of the project design and criteria that the MoEW had submitted, awarded the contract to a Spanish-Lebanese consortium between Abinar and Butec.
But shortly after, the companies were told that their bid had actually been rejected because their proposal carried a price tag of $650 million and the ministry would not be able to foot the bill with money they had remaining. “There was no price on the conditions of the tender. We should have known if there was a limit…it is not professional to do that and it reflects badly on how the government engages with private companies,” Myrna Zakaria, PR manager at Butec, told Executive.
Bassil asked the Lebanese cabinet for more cash to push the contract through, but his plea fell on deaf ears, and so it was that a very good deal for the government had to be scrapped and a second tender round was launched. “If we look to the long term and what this project entailed then I think [the rejection of extra funding] was a huge mistake by the Council of Ministers,” argued Bassil’s advisor Raymond Ghajjar.
Ghajjar reasoned that they could not have known the available funds for Deir Ammar II at the beginning of the tender process, as it was dependent on the outcome of the reciprocating engines deal. Critics would charge that this amounts to a serious lack of foresight. As one senior member of government said on condition of anonymity, “this stinks – there was surely incompetence and at best a poorly managed tender document.” To leave prospective companies, who exhaust considerable time and money in preparing bids, to guess the value of projects is opaque in the extreme.
The companies were given only a month to resubmit tenders after the minister’s engineers had shaved back the specifications on the project to save money – at the expense of becoming technically inferior. With Abiner-Butec out of the running, and the timeframe too tight for new entrants to the bidding process, the deal eventually went to the Greek firm J&P Avax.
With the ink on the contract barely dry, objections were raised that J&P Avax had misled the government and had not even met the specifications on the original document. “They were awarded the tender even though they hadn’t reached the qualifications, which called for two plants of at least 250MW. The two plants they had worked on were not of this capacity, but closer to 200MW,” opposition MP Youssef explained.
While the Shura Council finally decided that the deal should stick, Ghajjar at the ministry could only offer a somewhat spurious technical explanation for the divergence between what J&P Avax claimed in their bid and what existed on the ground. In any case, he is confident the government’s back is covered by strict penalties if the firm fails to meet the contractual agreements. “If any numbers have been cooked then they will have to pay in the end…we are very well protected. You could say we are goof-proof.”
Opaque efficiency?
Gebran Bassil’s impression on the oil and gas, energy and waters sectors is indisputable. When compared to many of his ministerial colleagues, most of whose impact on their sectors has been negligible at best, this is laudable. But pugnacious attitude has won him as many enemies as it has policy victories.
His somewhat liberal approach to the rules, regulations and laws may speed up the processes but it does little to inspire confidence in the probity of his dealings. The battle is too easily taken to the COM where it is fought with the political weight of the Free Patriotic Movement behind him. Transparency is an afterthought.
The foundations laid for the oil and gas sector cause concerns over the power being placed directly under the minister and his engagement with the institutions of the state. Furthermore, the power sector contracts fiasco is one of a number of examples where the efficacy and rectitude of the ministry in engaging the private sector is unconvincing.
So as we contemplate the flurry of press conferences we can ask ourselves, is Lebanon getting a good deal? We can only hope so.
