Lebanon’s murky petroleum business
How wasta, uneven partnerships and an international web of shell companies characterize the country’s new oil and gas sector
This Executive investigation into Lebanon’s oil and gas companies is part of a special report on the sector. Read more stories as they’re published here, or pick up October’s issue at newsstands in Lebanon.
“If you want to hurt me, I can hurt you back,” Antoine Dagher tells Executive, laughing as he tries to keep his name out of this article. A former communications manager for Petroleb, one of three Lebanese companies prequalified to bid in the first offshore licensing round, Dagher belatedly clarifies, “I’m not threatening you.” Petroleb still uses Dagher as a consultant, but in early September, so did the Lebanese Petroleum Administration (LPA). Executive had wondered whether or not this was a conflict of interest, which Dagher insisted it was not.
Apex Gas Limited, is actually registered in Hong Kong, not Beirut, through a process tailored to keep shareholders and directors anonymous
This is only one of the complications encountered in trying to pin down the details about the three ‘Lebanese’ companies — out of a total of 46 — prequalified to participate in Lebanon’s nascent oil and gas sector. A company identified by the LPA as a ‘Lebanese’ prequalifer, Apex Gas Limited, is actually registered in Hong Kong, not Beirut, through a process tailored to keep shareholders and directors anonymous. Taken together, these experiences offer a fresh perspective on the murky nature of the oil and gas industry, and how instead of starting off with a clean slate, it appears Lebanon’s new petroleum sector is already sliding into the shadows.
Experience needed, unless you have a partner
Both Petroleb and Apex have no previous experience in the industry. Only the third prequalified Lebanese business, CC Energy Development (CCED), is an established oil and gas company, having drilled and produced oil onshore in Oman since 2010. But the lack of experience did not stop Petroleb and Apex from making the cut. According to the 2013 decree governing the prequalification process, companies that don’t meet the eligibility requirements — including previous oil or gas production experience — can partner with companies that do meet the requirements to jointly prequalify as one legal entity. This is precisely what both Petroleb and Apex did. Petroleb paired with Bermuda based GeoPark, which is active in South America, and Apex teamed up with the UAE’s Crescent Petroleum, which got into the oil and gas game in the early 1970s.
Both Apex and Petroleb tell Executive they plan to branch outside of Lebanon, but there is no evidence either has done so yet. Petroleb’s Chief Executive Officer Salah Khayat tells Executive, “Petroleb is active outside Lebanon and is considering various [exploration and production] assets, while building its technical team.” Chief Operations Officer Naji Abi Aad says an announcement of the company’s work outside Lebanon is forthcoming.
Friends in high places
Karim Kobeissi, Petroleb’s lawyer, was an advisor to the Ministry of Energy and Water in 2008 and helped write the 2010 offshore exploration and production law
In addition to serving as Petroleb’s chief executive, Khayat owns 50 percent of the company, which was founded in September 2011, according to papers it filed with Lebanon’s commercial registry. Khayat is the nephew of Tahseen Khayat, owner of Al Jadeed television and founder of the Tahseen Khayat Group, a sprawling conglomerate with businesses in engineering and contracting, publishing, printing, hospitality and leisure, and sales and distribution in both Lebanon and abroad. Omar and Bashar Khayat evenly split the remaining 50 percent of Petroleb’s shares. Karim Kobeissi, the company’s lawyer, was an advisor to the Ministry of Energy and Water in 2008 and helped write the 2010 offshore exploration and production law.
According to the company, its deep connections offer excellent benefits to its bidding partner, GeoPark — an important point given Petroleb’s dearth of experience in oil and gas. COO Abi Aad says, “Everywhere in the world, if you have good connections and a strong position with the main decisionmakers you have [a] good chance, but you have to have the technical requirements. We have very strong connections in the country and good relationships, we know everybody in the country.” He concludes, “You can be sure GeoPark finds us useful.”
Hong Kong connection
But while Petroleb is up front about its business model, information on Apex is much harder to come by. The company is not registered in Lebanon, nor does it have a website. A booklet produced by the LPA offering information about all 46 prequalified companies is dead silent on Apex, the sole omission.
Apex’s true owners, UniGaz CEO Mahmoud Sidani and Chamber of Commerce, Industry and Agriculture of Beirut and Mount Lebanon Chairman Mohammad Choucair, aren’t on the documents
Apex was registered in Hong Kong in April 2012, company lawyer Tarek Nahas confirms. Nahas says he chose Hong Kong as a place of registration — as opposed to Lebanon — so as to be governed by English law in order “to have a clearer legal framework.” Asked why the company’s papers, which Executive purchased, do not list any Lebanese nationals, Nahas says the company’s true owners, UniGaz CEO Mahmoud Sidani and Chamber of Commerce, Industry and Agriculture of Beirut and Mount Lebanon Chairman Mohammad Choucair, aren’t on the documents. Both Sidani and Choucair confirmed they are partners in Apex, but only Sidani would grant a more in depth interview.
Apex is benefiting from a Hong Kong secrecy provision that allows owners to pay yearly fees to have nominal directors and shareholders listed on paper to “keep your true director identity completely confidential,” as a Hong Kong based incorporation services firm puts it. On paper, the director of Apex is Roger Leo A. Carino and the company’s sole shareholder is Abacus (Nominees) Limited. A conversation with Intercorp, another Hong Kong based company registration service provider, reveals that both Carino and Abacus are strawmen in place to keep Sidani and Choucair publicly distanced from the company. Carino is also listed as the director of Apex Oil and Gas Limited, another company registered in London. Reached by phone, Carino says he doesn’t have any paperwork in front of him and is preparing to travel, so he cannot answer Executive’s questions. He did not reply to an email Executive sent seeking clarification. The sole shareholder of Apex in London is Aries Global Investments, registered in Curaçao in the Dutch Caribbean. Nahas says he knows nothing about the Apex in London, despite the exact same names and directors.
Sidani could not explain why Apex chose to pay money to obscure its real owners from public view, referring Executive back to Nahas, who did not respond to a follow up interview request.
When set up in 2012, Apex was worth a scant HKD 10,000 ($1,290), and nothing more recent has been publicly disclosed
Unlike Petroleb’s Abi Aad, Sidani did not cite “connections” as the benefit his company brings to its partnership with Crescent Petroleum, but he did get defensive when first asked. “We are investors, and [as] Lebanese investors, it’s our right to put our money in Lebanese gas. [It’s] as simple as that.” Pressed on what Apex brings to the table, Sidani says, “They want us to share the risk, because this is like bingo, you might spend $400 million on four wells and not find any gas. So we are splitting the risk.” It’s unclear, however, just how much risk burden an apparently tiny company — when set up in 2012, it was worth a scant HKD 10,000 ($1,290), and nothing more recent has been publicly disclosed — can shoulder compared to a company like Crescent, which is worth at least $500 million.
But this is just one question in a sea of uncertainty that encompasses both Apex and Petroleb — and raises questions about the transparency of the entire sector. When asked the simplest of questions, to confirm that Apex is registered in Hong Kong, the LPA declined to answer.
Link to source: http://www.executive-magazine.com/business-finance/business/lebanons-murky-petroleum-business
