As part of its series of discussions with experts and professionals working in the oil and gas industry, Middle East Strategic Perspectives met with Abboud Zahr, manager of the Oil & Gas Division at Design Engineering Partners (DEP), a consulting and engineering firm based in Beirut and active across the MENA region. Zahr, who has established the division in 2011 upon returning from Kuwait where he worked in the upstream oil industry, stressed on the need to ensure the development of a transparent sector early in the process.
1. How would you evaluate the process so far?
One of the most controversial issues in today’s political debate is the legitimacy of an exceptional meeting of the caretaker cabinet to approve the two pending oil and gas decrees. These decrees must be approved by the cabinet in order to be able to close successfully the First Licensing Round.
In the past, natural resources in abundance were a source of growth and wealth for developing countries, or so it was thought. If you have oil, if you have diamonds, if you have gold, these will be used to help develop the country. The fact that many resource-rich countries were not able to achieve development have led some people to talk about a resource curse, meaning that the revenues from foreign investment in oil and gas get siphoned off in corruption. There is a lack of transparency and accountability in most of the developing countries. In fact, some studies consider countries that are richer in resources grow more slowly, not more rapidly, because of the burden resulting from the exploitation of their resources. That said, there are many counterexamples. If you look at Chile, Indonesia, Malaysia, these countries have been successful in using their resources. While in Equatorial Guinea, Myanmar, Angola, Nigeria etc. billions of dollars are siphoned off every year into private pockets and authoritarian leaders.
2. What are the standards that must be adopted to ensure a transparent process?
The key issue to be emphasized here is financial transparency and accountability; we need to address some of the potential sources of support for transparency and accountability. One of the principal ones is the EITI, the Extractive Industries Transparency Initiative. There are 25 countries that have earned an EITI compliant status, and 16 other candidate countries that are seeking to implement the Initiative. In addition, nearly 80 leading corporations, international oil companies and mining companies have chosen to support the Initiative. Many of the 46 companies pre-qualified for the first licensing round in Lebanon are supporters of the EITI. We also need to strengthen financial transparency by calling on companies to declare the money paid to governments.
Insisting on companies to publish what they pay and on countries to publish what they receive would allow the detection of discrepancies and may lead to strengthen accountability.
3. What is the role of local civil society?
The key issue is always going to be the local population, the local leadership, the local press, and NGOs etc. that try to promote openness and transparency.
If Lebanon starts to export significant quantities of oil and gas, whether this will represent a blessing or a curse will largely depend on financial transparency, i.e. how the revenues will be managed and used, and accountability.
Having an effective monitoring system in a country like Lebanon, can deter corrupt practices.
4. From your experience, do you think delays in approving the two oil & gas decrees and in pursuing the first licensing round will affect foreign companies’ interest?
Delays in approving the decrees is not good for Lebanon especially that some neighboring countries are moving quickly on this matter. Every day new opportunities are emerging worldwide, and as the time passes companies will seek better opportunities elsewhere. However, for the companies that have Lebanon on their map of interests, they will still participate but by factoring in higher risk margin which means less attractive offer and less income for Lebanon.
Interview Published on the Middle East Strategic Perspectives Website on October 23d., 2013.