Lebanon’s Oil and Gas Sector: A Chance to Lead Global Transparency Efforts

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As Lebanon prepares to drill its first exploratory well by the end of the year, the country has a unique opportunity to set a new standard for transparency in the oil and gas sector. With a law that surpasses international standards, Lebanon is poised to become a world leader in disclosing the real owners behind companies contracted to work in the sector.

A Step Towards Global Transparency

Lebanon’s intention to join the Extractive Industries Transparency Initiative (EITI), a club of 52 nations that adhere to minimum standards of transparency, is a significant step towards achieving this goal. The EITI aims to prevent the “resource curse” phenomenon, where countries rich in natural resources are plagued by corruption, conflict, and poverty.

Challenges Ahead

However, Lebanon’s track record on corruption is far from stellar, ranking among the most corrupt nations in the world. The risk of corruption in the oil and gas sector is high, with watchdog groups warning that unqualified companies could be awarded licenses, leading to increased costs, diminished shareholder returns, and environmental and social failures.

A Progressive Law

To combat this, EITI has mandated member-countries to disclose the real owners behind companies contracted in the extractive industries sector, known as beneficial ownership. Lebanon’s Strengthening Transparency in the Petroleum Sector Law (STPS) takes it a step further by requiring the disclosure of beneficial ownership not only for direct license-holders but also for subcontracted companies.

Implementation Concerns

This law is considered progressive and at the leading edge of current practice, said governance experts. However, its implementation remains a concern, with civil society groups warning that Lebanon’s track record on implementing laws is poor. The STPS Law will soon face its first test as French company Total prepares to hold tenders for subcontracted services for exploratory drilling.

A Chance to Lead

Lebanon’s membership in EITI would not only secure transparency in its own oil and gas sector but also push world standards forward, said Eddie Rich, deputy head of the EITI. “The EITI has always evolved from the country-level up. This could be the way Lebanon innovates EITI.”

The Path Ahead

Before Lebanon can join EITI, it must compose a Multi Stakeholder Group (MSG), a body composed of government representatives, companies, and civil society organizations that facilitates information flow and creates trust between parties. The MSG is expected to take around a year to form, with Energy Minister Nada Boustani calling on civil society to hold elections for their members.

A Chance to Stand Out

The EITI is seen as a strong motivation for Lebanon to demonstrate its commitment to transparency, said Matthieu Salomon, senior governance expert. “I think Lebanon could really stand out as a global leader on these issues and push the direction of travel of this kind of anti-corruption work.”