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SKeyes Center for Media and Cultural Freedom - Samir Kassir Foundation

SKeyes and GCJD Host Seminar on Covering Oil and Gas Sector in Lebanon

Tuesday , 19 March 2013

Over the weekend, the SKeyes Center for Media and Cultural Freedom hosted a seminar on covering the emerging oil and gas sector in Lebanon. SKeyes organized the seminar in partnership with the Global Center for Journalism and Democracy at Sam Houston State University in Texas.  The event, which took place at the Riviera Hotel in Beirut on March 15-17, brought together journalists working in Lebanon and trainers with expertise in the fields of journalism, the industry and the environment.

 

Day 1

The seminar began on Friday with an overview of the background and current status of the oil and gas sector in Lebanon by Mona Sukkarieh, co-founder of Middle East Strategic Perspectives.

The first oil and gas surveys took place in Lebanon from 2000 to 2002, Sukkarieh said. But, there are still many questions about the size of the oil and gas reserves off of Lebanon’s coast. According to the current estimate, Lebanon’s reserves could be similar to the size of Oman’s, which rank 26 in the world in terms of proven reserves.

There is further uncertainty about how much of Lebanon’s oil and gas is recoverable and how much of that is of commercial quality. “People here are thinking we are on the way to becoming the next Abu Dhabi,” Sukkarieh continued, which is not necessarily the case.

Lebanon is currently in the bidding process to determine which companies will be selected to develop its oil and gas resources. From this point, it will likely take until 2020 for Lebanon’s gas to reach the market, Sukkarieh said.

In this case, Lebanon is further behind its neighbors Cyprus and Israel, who also have sovereignty over parts of the eastern Mediterranean basin where oil and gas deposits have been found. Border disputes with Israel and Cyprus have also entered the picture to complicate Lebanon’s oil and gas development, Sukkarieh added.

“All of this is new in Lebanon,” Sukkarieh said about the oil and gas sector. As a result, there is a need for accountability and transparency, which is where the press can play an important role, she concluded.

In the second session, Chris Huntington, a former CNN reporter and a partner with New Energy Fund Advisors, addressed what journalists need to know about the oil and gas industry in regards to terminology, technology and legal treaties pertaining to the eastern Mediterranean region.

Huntington provided an overview of recent technological advances that have allowed offshore, or deepwater, oil and gas reserves to come under development, such as Lebanon’s. However, deepwater offshore oil and gas drilling is still challenging as the technology for extraction is new and there is still no safe and efficient way to transfer the oil and gas back to shore, Huntington said. He also outlined regional tensions and security concerns as potential hurdles to development as well as Lebanon’s issues with transparency and political mismanagement.

Huntington also spoke about the volatility of oil and gas markets. With so many new reserves coming under development due to new technologies, there is a potential for a price collapse that will reduce the profitability of the oil and gas sector. Also, if renewable energy technologies advance and become more widely used countries relying on fossil fuel exports will face a challenge because the needs of the electricity grid will be greatly diminished, he said. “Just as quickly as things can go well, things can go in the other direction,” Huntington said.

In Friday’s final session, Claude Salhani, a veteran Middle East correspondent and frequent contributor to OilPrice.com, gave an overview of different skills and strategies to use while covering the oil and gas sector in the Levant.

Salhani emphasized the need to understand the broader context of history, economics, environment, and conflict that all come to bear on the players in Lebanon’s oil and gas sector today and its development. Finding entry points to tell stories that are relatable and having a strong command of the language of the industry are also critical for relaying technical information to readers in ways that are accessible, Salhani said. Luck and daring are also key parts of being a good journalist, he added.

 

Day 2

The second day began with a session led by Jessy Trad Kastoun, a senior producer and business news anchor on Lebanon’s MTV channel. Kastoun spoke in depth about the global picture and functioning of oil markets.

The Middle East holds 56 percent of proven oil reserves, Kastoun said. Oil markets, like other markets, follow basic rules of supply and demand. Organizations like OPEC and conflict also play important roles in oil pricing.

Futures trading works to transfer risk from people who want stability in pricing to people who are willing to risk volatility for potentially large profits. Speculation in the futures market can also drive up the price of gas, as happened in 2008, Kastoun said.

The effect of developing oil and gas resources will be positive overall for the country, Kastoun predicted in her presentation. But, there will also be corruption. “Unfortunately, transparency has vanished from the Lebanese vocabulary,” she added.

In the second session of the day, Timothy K. Maloy, a business reporter covering the oil-driven economic boom in Iraq’s Kurdistan region, led a training session on the fundamentals of reporting on the oil and gas markets. He used the volatility in the oil markets in 2008, with oil peaking in mid-summer at over $145 dollars per barrel, as a case study in developing stories that make the complexity of the oil and gas markets relatable to readers.

Economics reporting is important because it is about pocketbook issues, Maloy said. He recommended reporters start at the retail level to understand how issues, like the high price of oil in 2008, affect average people. After establishing how economic issues are affecting people it is then possible to talk about the macroeconomic side of the story in a way that is compelling and understandable. Maloy also said that it is important to try to develop contacts with all of the actors involved, from consumers to politicians to technicians to oil company executives.

In the third session, Laury Haytayan, the MENA Senior Associate at the Revenue Watch Institute, and Diana Kaissy, the MENA coordinator for Publish What You Pay, presented on transparency and governance in the oil and gas sector.

Haytayan laid out the ideal regulatory framework for transparent governance, which includes a constitution, clear and coherent policies, enabling laws, enforceable regulations and licensed agreements.

Lebanon technically has this structure in place, Haytayan said. What is missing is enforcement, and that is largely absent due to lack of clear policies and transparency.

Transparency builds trust, Haytayan continued, because it lets citizens know that the state is actually working for them instead of against them. Transparency also levels the playing field between governments, citizens and corporations. Governments are able to negotiate with companies and citizens are able to monitor the behavior of the government and corporations. Transparency is not just against the government, but it can also be leveraged to hold corporations accountable.

Ideally, the value chain for extracting oil and natural gas resources flows from deciding to extract, getting a good deal, collecting revenue and managing resources to ensure sustainable development for future generations. Lack of transparency at any step in this process can lead to corruption and disrupt the potential positive benefits of developing the oil and gas sector in Lebanon, Haytayan said.

Kaissy continued to speak about the Extractive Industry Transparency Initiative (EITI). The EITI is a voluntary initiative that states decide to comply with and establishes a global standard for revenue transparency in extractive industries. The hope is that civil society will push states to join the initiative, Kaissy said.

States that comply with the initiative are required to provide accurate information about the revenue they receive from extractive industries. This information will give civil society campaigns the tools to demand transparency and an end to corruption. Transparency will also make it possible to have a debate about what to do with the money from the oil and gas sectors. Journalist can play a big role in starting this debate, Kaissy said. “Lebanon is lucky,” she continued. “We are at a very early stage of doing this right from the beginning.”

However, there are ways for corruption to continue even with the EITI. Oil companies can exaggerate the cost of production and politicians can use their influence to funnel money from secondary economic activities related to the oil and gas industry to friends, family or personal businesses, Kaissy added.

“As long as everything is transparent we can reduce corruption,” Haytayan concluded. “We cannot eliminate corruption. That doesn’t exist.”

 

Day 3

The third day of the seminar began with a workshop led by Kris Van Orsdel, a government affairs specialist and policy analyst who worked with Ocean Conservancy to advocate for the restoration of the Gulf of Mexico’s ecosystem following the BP Deepwater Horizon oil spill. The workshop focused on the lessons that can be learned from the United State’s experience with oil and gas development in Louisiana in order to avoid making the same mistakes that led to environment disasters.

Louisiana loses more than 90 meters of land every 40 minutes, the highest rate of land loss in the world today, largely due to the consequences of oil and gas drilling, Van Orsdel said. Also, everyday in the Gulf of Mexico there is an oil spill or a leak that we do not hear about. The only ones that are reported on are the big stories.

As drilling moves further offshore it becomes less safe, Van Orsdel continued. However, the continued risk taking is driven by profit motives. Additionally, oil companies do not apply the same environmental standards in developing countries as they are held to in the United States and Europe, and they will not help with the cleanup of disasters unless they are contractually obligated to. That is why it is important to make sure the right safeguards are built into the contract before it is signed, he said.

The environment in the Eastern Mediterranean is already under a lot of stress, Van Orsdel continued. It is important for a baseline assessment of the environment to be conducted prior to beginning to drill. That way, it will be possible to assess the negative environmental impact of oil and gas extraction and hopefully adopt practices to mitigate it. All of these things, including job-training programs for Lebanese citizens, community development funds and environmental protections, should be included in the initial contract. Asking the right questions to oil company officials and politicians now and informing citizens about the process and potential impact of the industry can make sure that the necessary components are added to the oil and gas contracts so that Lebanon can avoid the same mistakes the United States has made.

A lack of transparency and a lack of honesty destroyed much of the Gulf of Mexico for years to come, Van Orsdel said. “You have the opportunity here as journalists to ask the questions so that these things are put in place and disasters don’t happen here.”

Ben Van Heuvelen, managing editor of Iraq Oil Report, led the final workshop of the day, which used examples from around the world to focus on best and worst practices in oil and gas development.

Van Heuvelen began by speaking about the ‘old_paradox of plenty’ whereby countries that suddenly begin developing their natural resource wealth actually suffer more negative economic consequences than they experience benefits.

Corruption is an obvious challenge facing countries that have recently come into oil wealth, Van Heuvelen said. Less obvious, however, is that a lowering or elimination of taxes, due to their replacement by oil revenue, often aids this corruption. The elimination of taxes erodes the bonds between governments and citizens. As a result, residents of a country feel less like citizens and have less leverage and governments have a greater ability to act with impunity.

Additionally, countries that heavily count on oil revenues are vulnerable to the volatility in oil prices. For example, 95 percent of Iraq’s budget comes from oil revenue as opposed to taxation or other sources. “This is not a sustainable model,” Van Heuvelen said. Instead, Iraq should aim for a future where there is taxation and diversified sources of revenue.

Another problem is the rise in the value of domestic currency experienced as a consequence of increased oil and gas revenues. As a result, it becomes more expensive for other countries to buy goods other than oil or gas. So, sectors of the economy such as agriculture, manufacturing and tourism tend to suffer.

The combined risk of these factors is for a country to show the appearance of economic health due to a rising GDP, but actually have the overwhelming majority of people experience a negative effect, Van Heuvelen said. The ‘old_paradox of plenty’ has been observed in all countries that have started to develop their oil and gas reserves in recent history, Van Heuvelen continued. The only exception is Norway.

The final session of the conference consisted of a screening of Aaron Sorkin’s HBO television series “The Newsroom”. The episode touched on relevant themes addressed during the conference and was followed by a group discussion about lessons learned from the conference and challenges and opportunities facing journalists covering the emerging oil and gas sector in Lebanon.

Following the seminar, Matt Nash, a journalist with NOW Media, said the technical information provided by the trainers was very helpful. “I’ve never seen this before,” he said. “I’ve never seen an industry built… so, its good to hear from other seasoned professionals.”

Christne El-Cheikh, a journalist with Al Sumaria news agency, said she was impressed by how knowledgeable and open the trainers were. Talking with the trainers, and the seminar in general, helped to rejuvenate her motivation as a journalist, she said.

The seminar on covering the oil and gas sector in Lebanon was the second event organized this year jointly by SKeyes and the Global Center for Journalism and Democracy, with the support of the European Union. The previous conference focused on covering international justice and took place in Beirut on January 18-20. 

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