The Lebanese proverb probably most apt for doing a good business deal roughly translates as follows: Always give your bread to the baker, even if he eats half of it. That’s because bakers know what they are doing with bread; someone else will probably just burn it. So when the Lebanese cabinet finally formed the Petroleum Administration last month, many feared the bread was toast before it even began to bake.
There is no doubt the appointment of the Petroleum Administration by the cabinet is, in theory, a welcome measure. If our country is to ever reap the rewards of what hydrocarbon riches likely lie below our seabed, the Petroleum Administration will be needed, not only to negotiate with international oil companies (IOCs), but also to provide policy continuity when governments and ministers play musical chairs, as they so often do.
The manner in which the energy minister and affiliates of the parliamentary speaker pushed confirmation of the makeup of the board through cabinet in the waning minutes of a cabinet meeting last month — offering almost no time for the prime minister and other participants to scrutinize the list — is not reassuring. Nor is the fact that, after nearly an 11-month delay in appointing the Petroleum Administration, the names on the final list largely lack the international clout called for in the job descriptions for the different board posts.
Lamentably, this kind of behavior can be expected of politicians who barely bother to read or debate most policy issues that are pushed through the executive or the legislature. In due course, government (both the opposition and the governing majority who voted for the petroleum law) managed to make sure that the fate of the Petroleum Administration will likely follow the course of the other so-called independent regulatory bodies that were intended to provide policy continuity. Take, for instance, the Telecommunications Regulatory Authority (TRA), finally appointed in 2007. It is in contravention of the law that actually created it (in 2002) because it is still financially dependent on the telecommunications ministry, and the tenure of its board (from which two of five members have already resigned) is long up. Today, the TRA is little more than an “advisory body” to the minister by the admission of its own board members.
Perhaps thankfully, that may not be a problem for the Petroleum Administration since it is not even nearly as independent as the TRA. While it enjoys “financial and administrative independence from the minister” the latter also “provides oversight for the body,” according to law. A quick read through the law reveals that the body is beholden to the minister first and the cabinet second to organize the “essentials of its work, its organization, its hierarchy and its salaries.” And it is the minister’s signature that is needed on any exploration and production contracts, not the Petroleum Administration’s or the cabinet’s.
The much-heralded achievement of reaching a consensus on rotating presidency for the board is hardly cause for cheer. While it may mean that no single party can consolidate power over the administration, it also means that each politically affiliated board member (which they all are) may easily come to loggerheads with the minister if their bosses don’t agree.
To boot, there is no historical precedent to show this has worked to the benefit of any nation pursuing such a policy. In an industry such as oil and gas where procedures can span years and exploration and extraction can take decades, an annual rotating presidency will likely mean the opposite of the much needed policy continuity, not to mention the influence IOCs will be able to bring to bear on the disempowered Petroleum Administration members. And given that IOCs will have around six months to prepare their bids once, or if the cabinet passes several implementation decrees, it is almost certain that no bidding round will occur until after the next elections. That means the possibility of a new minister in town, with which the Petroleum Administration might not find itself in such good standing.
Finally, the Petroleum Administration will have no authority over the areas that are in dispute with Israel in the south, nor the sovereign wealth fund that is legally mandated to be set up in one year, when the first bidding round is tipped to launch. Both issues have the potential to derail the entire process and transform any discovery of oil into an unmitigated disaster, both politically and economically.So, before we lick our lips in anticipation of untold wealth being served up to us, we may want to have a good think about who’s baking up the deal, and what’s going to happen to all that bread.
First published in Executive’s 2012-2013 end of year issue
Sami Halabi 