Feral Jundi

A loser is someone is someone — individual or group — who cannot build snowmobiles when facing uncertainty and unpredictable change;
Whereas,
A winner is someone — individual or group — who can build snowmobiles, and employ them in an appropriate fashion, when facing uncertainty and unpredictable change.-Col. John Boyd

There are a couple of factors going on in Lebanon that are driving the security market there. One is the situation in Syria and the other is a massive gas field off of the coast.

With Syria, you see a lot of spill over across the borders that include refugees or combatants. As Syria continues to fall and morph into a massive jihadist playground, it’s neighbors will suffer. This surge of militant fighters streaming into Syria all have agendas and all are looking to cause chaos amongst their various enemies in the region. Sunni versus Shia, devout islamists versus infidels, etc..  Lebanon, will be impacted, and security in all of it’s forms is what the people will demand and seek if the state cannot provide it. Here is a quote about this reality.

The A to Z Group, a security company offering guard services and cash transfer protection to corporate clients and Lebanese public institutions, hired an additional 100 people about six months ago to meet demand, bringing its total staff to 250 people, General Manager George Ghorayeb told The Daily Star.
“We cover all of Lebanon and I’ve noticed that clients everywhere are afraid of the situation. The biggest demand is for residential and corporate guards,” he said. “There has been a big increase in buildings requesting services because they are scared.”
Elie Georgiou, the executive manager of PRO.SEC, a Lebanese firm that employs 800 people and offers physical security and close protection services, said business remained stable between 2012 and 2013, but there had been an increase in job seekers.

As for energy, the Levant Basin gas fields and rush of Cyprus and Israel to get in there and tap into it, is causing Lebanon to rethink it’s views on those fields. It wants in on that gold rush. (article posted below)

Competing claims by Israel and Lebanon to about 215,000 acres of potentially mineral-rich maritime territory and increasing instability caused by the Syrian civil war could also complicate the effort.
Lebanon began to tap its onshore oil resources in the 1960s, but the long civil war stopped all development. While the government has known about the resources lying off the Mediterranean coast for decades, the focus did not shift there until 2000. Political infighting, a major war with Israel and long stretches without a government have hampered decision-making since then.
Officials swung into action only recently, after Israel and Cyprus began developing their natural gas reserves in earnest. The Petroleum Administration, responsible for negotiating oil and gas contracts, was supposed to be appointed early last year, but squabbling over representation for the country’s different religious sects delayed the process by months. Ultimately, the six seats were given to men from each of Lebanon’s six largest religious groups.

So with that said, if Lebanon wants to do business with those companies that can extract this resource, it will have to get it’s house in order politically, and provide for the security needs of these companies. Enter the PMSC’s.

The first article I posted below delves into the potential for private security and gives a glimpse into the market of force in Lebanon and here is a quote that grabbed my interest.

This might be poised to change since many of the international firms that thrived off Western military contracts in Iraq and Afghanistan are diversifying operations and looking to new markets, Olver of Kroll said.
“The security industry in general is in crisis, so a lot of international companies are looking for the next big thing or to diversify into the next little five or six things,” Olver said. “A lot of the international oil and gas companies have set up one-man offices in Lebanon since the oil and gas tender round is about to start and a lot of security guys are looking to that sector. They see that the oil companies they already service in Libya are looking at Lebanon, so a lot of them have positioned themselves to be able to provide services in Lebanon.”

Interesting stuff and we will see how it goes?  Although the question remains, is turmoil good or bad for the security industry there?

I would say that security contracts pre-Arab Spring were of one type and quantity, but now that the market has changed, that security companies are probably having to adapt to the ‘new’ security requirements that have materialized as an outcome of the Arab Spring. Those companies that can evolve and innovate to meet those new security requirements will stand to survive the changing market.  Adapt/evolve/innovate–or die. Or how Boyd would put it, winners are those that can ‘build snowmobiles’. –Matt

Turmoil no clear-cut gain for security firms
August 19, 2013
By Lysandra Ohrstrom
As outbreaks of violence across the country become increasingly routine, one would expect Lebanon’s private security companies to thrive. But the global trends that have reshaped the international private security industry over the past few years and heightened risk aversion on the part of governments and corporations have complicated what would otherwise be a straightforward economic success story. Michael Olver, the director of Kroll’s Middle East business intelligence unit, said Lebanese firms were likely to see sustained or increasing demand for services from their existing stalwart clients like embassies, which typically boost their spending on security when the situation deteriorates in order to maintain operations.
At the same time, they will probably see a reduction in the number of multinational corporate clients, he said.
“Large international private sector firms are already evaluating the risk-return balance for having large offices in Lebanon and are going to be re-evaluating the need for a continued large-scale presence,” he told the Daily Star.
Kroll, which provides personal protection to high-level executive clients visiting Lebanon in addition to its business advisory and fraud investigation services, has already seen GCC nationals scale back travel to the country due the bans many Gulf countries have imposed.

The bulk of Kroll’s current regional work consists of advising international and Gulf clients looking to expand in the MENA market, including Lebanon, and local corporations, banks and individuals.
“If you’re a U.S. manufacturing firm doing a … [joint venture] with a Saudi partner, we will do a full analysis of their position in the market,” Olver said. “We work with Lebanese clients with Gulf interests because that’s where we are strong and often that’s where the money is.”
Though the volume of foreign direct investment aimed at Arab Spring-affected states has seen a steep decline since 2011, there is still demand for Kroll’s services from clients looking to ensure their business activities are not in violation of new EU or U.S. sanctions or that their existing partnerships don’t leave them exposed to individuals who are tainted by association with the old regimes, Olver said.
“If you look at business trends regionally, Syria was just opening up until two years ago. While previously there was a lot of call for a more standard pre-transaction due diligence advisory processes, since 2011 there has been a flurry of interest from corporations asking, ‘Can you look at a JV partner or vendor we looked at a few years ago in Lebanon and make sure we’re not in violation of the new Syria sanctions?’” Olver said. “A lot of people want to keep doing business in the Levant, but they want to make sure that they are not dealing with a front for someone on the sanctions list.”
ITF Detectives, a private detective agency that has operated in Lebanon since 1990, has seen demand drop across the board in the country this year, particularly for personal protection services due to the lack of intentional visitors. The agency is currently working on just three cases in Lebanon, down from 37 in 2012.
Like Kroll, ITF does due diligence for corporate clients from Lebanon or those looking to invest here.
“We use company records, personal research into individuals, their holdings, and other companies they may be a director of,” Buckle explained. “This hasn’t changed too much. What we have noticed a big change in is the private side. We’ve noticed a lot more personal mistrust. There’s an awful lot of fraud.”
ITF’s biggest case of the year so far has been an investigation into blackmail, which Buckle says is on the rise in the country.
“You have individuals based in Lebanon saying that if you don’t do x we will hack your website,” Buckle explained. “If you’re an Internet based website and you are being threatened with a massive attack on your website, you’re going to lose a lot of time and money if your website goes down, so you will probably pay.”
Payments range from $200 to $200,000 in the Lebanese Internet denial of service cases ITF has investigated, Buckle said, and are generally motivated by one of three reasons: to get credit card numbers and other personal information from visitors and use it fraudulently; “pure, straight-up blackmail, ‘if you don’t pay us, we’ll take you offline;’” and politically motivated denial of service attacks like those perpetrated by the Anonymous collective.
Buckle said he has identified four groups behind the attacks in Lebanon. The case ITF investigated this year was done by a “a group of individuals from the Middle East” that “may be politically motivated.”
Internet denial of service attacks are often accompanied by a host of jurisdictional complications, Buckle said:
“If you have a U.S. company on the Internet and they have offices in Russia and the Caribbean, and then the money is transferred via Western Union to Lebanon, who has jurisdiction Where is the crime? We deliver the information to law enforcement, but what can they do with it, where’s the crime. Is it in the Caribbean, Russia or Lebanon?”
Lebanese physical security companies – those that provide guards and security to residential and corporate compounds, individual body guards, and the like – have fared comparatively well so far this year, but competition is rising from international players and local upstarts alike.
The A to Z Group, a security company offering guard services and cash transfer protection to corporate clients and Lebanese public institutions, hired an additional 100 people about six months ago to meet demand, bringing its total staff to 250 people, General Manager George Ghorayeb told The Daily Star.
“We cover all of Lebanon and I’ve noticed that clients everywhere are afraid of the situation. The biggest demand is for residential and corporate guards,” he said. “There has been a big increase in buildings requesting services because they are scared.”
Elie Georgiou, the executive manager of PRO.SEC, a Lebanese firm that employs 800 people and offers physical security and close protection services, said business remained stable between 2012 and 2013, but there had been an increase in job seekers.
“I’ve noticed that there are a lot more people coming to work in the sector,” Georgiou told the Daily Star. “We’ve had a lot of people with BAs and other degrees who are coming to work in security because they have been laid off and there are no jobs anywhere else. Even if they have a BA in science, if he doesn’t know the principles of basic security he can’t be hired.”
There has been a slight increase in inquiries from potential clients, Georgiou noted, but “there is a lot of competition in the security field, so business has been stable. We lose some contracts and get new ones to replace them.”
This might be poised to change since many of the international firms that thrived off Western military contracts in Iraq and Afghanistan are diversifying operations and looking to new markets, Olver of Kroll said.
“The security industry in general is in crisis, so a lot of international companies are looking for the next big thing or to diversify into the next little five or six things,” Olver said. “A lot of the international oil and gas companies have set up one-man offices in Lebanon since the oil and gas tender round is about to start and a lot of security guys are looking to that sector. They see that the oil companies they already service in Libya are looking at Lebanon, so a lot of them have positioned themselves to be able to provide services in Lebanon.”
Whether Lebanese firms are able to continue to thrive in an increasingly competitive market, will depend on the type of contracts they have and the clients they serve, Olver said.
“Some will do well and some will go under. In spite of the image it presents, at the end of the day the security business is just that, its a business. The ones who deliver good products and who are run by better businessmen are the ones who do well.”

Story here.
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In Lebanon, officials talk of a bright future funded by offshore oil and gas reserves
By Caroline Anning,
June 02, 2013

Encouraged by successful gas exploration in neighboring Israel and Cyprus, Lebanon is seeking to transform its debt-ridden economy and creaking infrastructure by tapping into its own offshore oil and natural gas reserves.
The country’s energy minister, Gebran Bassil, last month opened the first round of bidding for contracts to explore the reserves. To a hopeful public, he spoke of potential revenue “in the billions” and, in an emotional video, envisioned a gleaming metro running through Beirut, a round-the-clock electricity supply and free education for all.
It is an appealing vision for a country that has no public transportation to speak of and daily rolling power cuts of up to 20 hours due to chronic infrastructure problems. The situation is so bad that in 2012, the World Economic Forum ranked Lebanon last out of 144 countries in quality of energy supply.
But analysts caution against being too optimistic.
“There are many factors that do not inspire confidence,” said Alia Moubayed, senior Middle East economist at Barclays Capital in London.
Lebanon’s dysfunctional political system, sharply divided along sectarian lines; an increasing absence of state authority; and poor coordination among government ministries could make it difficult to carry out such an ambitious plan, she said. There’s also a risk that politicians will misuse or misappropriate revenue generated by the energy resources.
Competing claims by Israel and Lebanon to about 215,000 acres of potentially mineral-rich maritime territory and increasing instability caused by the Syrian civil war could also complicate the effort.
Lebanon began to tap its onshore oil resources in the 1960s, but the long civil war stopped all development. While the government has known about the resources lying off the Mediterranean coast for decades, the focus did not shift there until 2000. Political infighting, a major war with Israel and long stretches without a government have hampered decision-making since then.
Officials swung into action only recently, after Israel and Cyprus began developing their natural gas reserves in earnest. The Petroleum Administration, responsible for negotiating oil and gas contracts, was supposed to be appointed early last year, but squabbling over representation for the country’s different religious sects delayed the process by months. Ultimately, the six seats were given to men from each of Lebanon’s six largest religious groups.
Lebanese officials hope to begin production in 2016, but that timeline leaves them lagging behind Cyprus and Israel, which share the Levant Basin with Lebanon. Cyprus recently signed deals for offshore drilling, and in March, Israel started pumping gas from its new $3 billion Tamar field. Israel, which is still officially at war with Lebanon, is also developing its huge Leviathan gas field, which has the potential to make the country a net energy exporter.
Most Lebanese are cautiously optimistic about their oil and gas prospects. But many are doubtful that Bassil — who has yet to improve the electricity situation — can deliver on his grandiose promises.
His recent public relations campaign, which coincided with the opening of bidding, was roundly mocked on social media, including one satirical ad suggesting that the ministry should dream higher, using energy resources to create luxury smoked-salmon versions of the standard Lebanese manaqeesh pastry or to host the Olympics.
Bassil denies that he is raising expectations too high. “In a country like Lebanon where people are becoming hopeless, you have to give them hope,” he said in an interview at his home in the mountains above Beirut.
“It is too soon to give exact quantities, but we are sure we have the petroleum resources and we have them in huge commercial quantities,” he said.
British geological surveyor Spectrum has estimated that up to 25 trillion cubic feet of gas lies under Lebanon’s waters, along with 440 million to 660 million barrels of oil.
If the predictions are correct, Lebanon’s gas reserves would put it on a par with Bolivia or Pakistan. By comparison, Israel is estimated to have around 35 trillion cubic feet of gas. The amount of oil in Lebanon would be comparable to the proven reserves of Ghana.
These are not the kind of resources that built glittering cities in the deserts of the Persian Gulf, but for a small country of 4 million people, the revenue could have a significant impact.
Fluctuations in energy prices and other factors make it impossible to know how much Lebanon would earn from oil and gas extraction. And the government, led by caretaker Prime Minister Tammam Salam, has yet to agree on a revenue-sharing framework to determine its share of the proceeds.
Once oil and gas do begin to flow, they could be used for domestic consumption rather than export. Lebanon now imports all its fuel, and a domestic supply could help relieve pressure on the loss-making national electricity company.
That would free up money to tackle Lebanon’s vastly inadequate electricity grid, which has never recovered from the 1975-1990 civil war, when production all but ground to a halt and energy infrastructure was damaged by bombs and neglect. Today, the power goes off for at least three hours a day in central Beirut and far longer in much of the rest of the country.
If Lebanon is able to export some of its resources, former prime minister Najib Mikati has suggested that the revenue could be used to pay off part of the country’s high public debt, which stands at about 140 percent of gross domestic product — the highest in the Arab world.
Additional oil and gas revenue would go into a sovereign wealth fund, as dictated by the country’s Offshore Petroleum Resources Law, and in theory it could be used to pay for the promised metro system and social services.
Story here.