Spoils of oil? Assessing and mitigating the risks of corruption in Lebanon’s emerging offshore petroleum sector

Spoils of oil? Assessing and mitigating the risks of corruption in Lebanon’s emerging offshore petroleum sector

To be fully prepared for Lebanon’s possible transformation into a major oil and gas producer, the risks of corruption in connection to its nascent petroleum sector need to be better understood and addressed.
Given Lebanon’s dismal track record in countering corruption and its chronically gridlocked political process, the risks of corruption in the country’s nascent petroleum sector are significant.

This paper tracks such risks along the value chain of the country’s expected petroleum production and in the context of revenue management and expenditure. It argues that the first steps in petroleum governance have been encouraging but are far from optimal. Sources of concern pertain to the Lebanese Petroleum Administration’s mandate and relative insulation from political interference, sub-optimal transparency in the pre-qualification process, the envisaged non-disclosure of exploration and production agreements, and the questionable assumption that sub-contracting for offshore petroleum activities will be largely self-regulating. In addition, a range of state institutions and agencies that will be crucial to daily petroleum governance are unlikely to cope if not drastically reformed.

Looking further ahead, this paper touches on a number of policy choices that will have to be made if or when Lebanon’s petroleum reserves are confirmed, including the establishment of a national oil company, determining the role and management of a ‘sovereign fund’, and considering more radical proposals for petroleum revenue expenditure and sharing. It concludes by arguing that a lively and informed national debate on the specificities and technicalities of Lebanon’s petroleum sector may help to create the very prerequisites of political change and create more favorable conditions to counter the risks of corruption.

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