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Extracting transparency

Lebanon’s oil industry must not be shrouded in secrecy

by Diana Kaissy

In October 2014, Lebanon hosted its first ever Petroleum Day. Much of the event’s focus was on civil society’s role in monitoring the country’s natural resources. One of the primary tools to aid this endeavor will come through the adoption of the Extractive Industry Transparency Initiative (EITI) — a global transparency initiative led by governments, companies and civil society. The Lebanese government has indicated its willingness to commit to the EITI. Anticipating this commitment, Lebanon’s civil society needs to develop an intimate awareness of how to adapt this tool to the local context and ensure all stakeholders work towards a transparent extractive sector.

The EITI Standard requires implementing countries to share and publish information at the local level covering such issues as: the allocation of rights, production data, as well revenue transfers to local jurisdictions, the industry’s social impact and revenue management. However, the EITI is not a magic bullet to kill corruption. Instead, it offers a platform for stakeholders to discuss policies, access information and generate debate to help inform regulatory decision makers. Civil society plays a major role in the EITI, through which it can empower citizens to act as watchdogs over natural resources that are rightfully theirs.

This is the case in countries like Niger, Indonesia and Mongolia, where civil society has been able to unlock the potential of the EITI and push governments to share information on tax payments, contracts and detailed production data. Such data, for example, was used by civil society in Niger to enshrine revenue and contract transparency in a new constitution in 2010 — going way beyond EITI requirements. Niger is not alone. In a growing number of countries, data made available through the EITI is being used to effect development through better revenue management. In Iraq, the Iraqi Transparency Alliance for Extractive Industries is currently working closely with communities to ensure that resource revenues are put to good use, in line with the EITI Standards.

But can Lebanon benefit from such an initiative when all its potential natural resources are still underground?

The answer is yes. Specifically, the EITI Standards addresses the allocation of rights and disclosure of the license registry and license allocation process; and recommends that contracts — as well as the beneficial owners of each company — be disclosed. In Lebanon, where these issues are constantly being questioned, the EITI will provide civil society — and, equally importantly, government departments and investors — with detailed information that will help disperse unnecessary suspicion and enhance the atmosphere of collaboration among all entities involved in the future of Lebanon’s extractive sector. Specific information regarding the licensing process, criteria adopted to award licenses, the names of companies awarded these licenses, as well as a description of what a license allows these companies to do are compiled into an EITI report, reconciled by an independent international auditing firm and disseminated for public use.

A primary weakness preventing any real and substantial progress in the Lebanese socioeconomic and political sphere is the country’s clientelistic approach to income generating sectors such as tourism and industry — where illegal subcontracting, conflicts of interest, and shady practices in the tendering of contracts have become the norm, not the exception. The result has, thus far, compounded mistrust among the different Lebanese stakeholders — namely government, civil society and the private sector.

Considering this challenging environment and a budding extractive sector, Lebanon is running the risk of heading toward the so called resource curse. Revenues from oil and gas might end up in the pockets of the privileged political elite, potentially depriving the majority of the population of any chance to benefit through shared prosperity and inclusive growth.

The EITI offers a means to address some of the aforementioned challenges facing stakeholders through openness and access to information — a needed step toward building trust and transparency.

In light of the above, we can say that the Lebanese Petroleum Administration (LPA) needs to invest more of its time and energy in reaching out to the public to share information regarding the steps and processes that Lebanon is undertaking to regulate the sector. Questions regarding the delayed publication of the Strategic Environmental Assessment, the process of awarding licenses and the issue regarding the two Lebanese oil companies that passed through the prequalification round of licensing, are among the primary issues that the LPA needs to address and respond to urgently.

Adopting the EITI at this stage, along with addressing the above and involving all stakeholders in the policy planning process, will also serve to enhance the atmosphere of trust that is greatly needed for the proper functioning of such a vital sector. While grabbing at this unique opportunity to adopt a tool that can add more transparency to the sector, civil society in Lebanon should invigorate its role as a watchdog and start demanding that it is given its proper place as an active participant in the governance of this crucial sector.

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Diana Kaissy

Diana Kaissy is executive director at The Lebanese Oil and Gas Initiative (LOGI), an oil and gas advocacy NGO.

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