Lebanon Upstream Fiscal and Regulatory Report - Stable Fiscal Regime Planned for Second Offshore Round
Lebanon is expected to offer a stable fiscal framework for the second round, which comes amid continued interest in the Eastern Mediterranean from new discoveries and as plans are made for Lebanon’s first offshore exploration well later this year. Over the coming years, Lebanon is expected to pass some missing pieces of petroleum legislation, such as the one concerning onshore activities and the creation of a sovereign wealth fund, though these missing regulations are unlikely to significantly affect the offshore operations.
Lebanon’s production sharing agreements (PSAs) terms are relatively competitive in comparison to the terms of neighboring countries, so that the return offered to investors is in a positive range in the regional context. The award of two blocks with the first licensing round to a consortium comprising Total, Eni, and Novatek suggests that if the exact terms of the second licensing round PSAs are still favorable, similar companies may be interested once again.
However, the country’s heightened policy risks may reduce the attractiveness to prospective new investors. Forming the new government took eight months after the May 2018 parliamentary elections, and it suggests that development of the petroleum regulatory framework could also suffer from delays. On top of this, the country, which has one of the world’s highest debt-to-GDP ratios, is facing an economic crisis that might force the government to change for the worse its fiscal policy, deterring future investments.
Political delays may cause problems for licensing and operators. Moreover, if hydrocarbons are discovered in commercially exploitable quantities, economic pressures could prompt tougher policies such as subsidized domestic market obligations, though stability clauses should protect existing licensees.
Lebanon Upstream Fiscal and Regulatory Report - Stable Fiscal Regime Planned for Second Offshore Round, presents the essential information relating to the terms which govern investment into Lebanon’s upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Lebanon’s upstream oil and gas investment climate.
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