Lebanon Upstream Fiscal and Regulatory Report – Stable Fiscal Regime Planned for Second Offshore Round

The creation of Lebanon’s petroleum fiscal framework has been completed, at least for offshore Lebanon, over the course of the past ten years. As the country progresses to its second offshore round, it appears that the fiscal regime will remain relatively stable. However, new regulations are planned in the coming years, including those concerning onshore activities and the creation of a sovereign wealth fund (SWF). Potential policy risks for the sector may arise in the future if oil or gas discoveries are made, especially along the Israeli-Lebanese contested border. On top of this, at the regional level, in relation to petroleum activities, Lebanon appears presently quite isolated as for the current discussions among some European and Middle Eastern and North African countries in relation to future commercial deals and exporting routes for hydrocarbons.

“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.

Scope

Overview of current fiscal terms governing upstream oil and gas operations in Lebanon

Assessment of the current fiscal regime’s state take and attractiveness to investors

Charts illustrating the regime structure, and legal and institutional frameworks

Detail on legal framework and governing bodies administering the industry

Levels of upfront payments and taxation applicable to oil and gas production

Information on application of fiscal and regulatory terms to specific licenses

Outlook on future of fiscal and regulatory terms in Lebanon

Reasons to buy

Understand the complex regulations and contractual requirements applicable to Lebanon’s upstream oil and gas sector

Evaluate factors determining profit levels in the industry

Identify potential regulatory issues facing investors in the country’s upstream sector

Utilize considered insight on future trends to inform decision-making

Table of Contents

1. Table of Contents

1. Table of Contents 1

1.1. List of Tables 3

1.2. List of Figures 3

2. Regime Overview 4

3. State Take Assessment 6

4. Key Fiscal Terms 7

4.1. Royalties, Bonuses and Fees 7

4.1.1. Royalty 7

4.1.2. Rental Fee 7

4.1.3. Training Obligation 7

4.2. Cost Recovery 8

4.2.1. Limit on Recovery 8

4.2.2. Recoverable Costs 8

4.3. Profit Sharing 8

4.4. Direct Taxation 9

4.4.1. Corporate Income Tax (CIT) 9

4.4.2. Deduction and Depreciation 9

4.4.3. Branch Remittance Tax 10

4.4.4. Withholding Tax 10

4.4.5. Capital Gains Tax 10

4.5. Indirect Taxation 10

4.5.1. Value Added Tax 10

4.5.2. Customs Duties 10

4.5.3. Stamp Duty 10

4.6. Abandonment Fund 11

4.7. Fiscal Stability 11

5. Regulation and Licensing 12

5.1. Legal Framework 12

5.1.1. Governing Law 12

5.1.2. Contract Type 13

5.1.3. Title to Hydrocarbons 13

5.2. Institutional Framework 14

5.2.1. Licensing Authority 14

5.2.2. Regulatory Agency 14

5.2.3. National Oil Company 14

5.3. Licensing Process 15

5.3.1. Licensing Rounds 15

5.3.2. Prequalification 15

5.3.3. Bidding 16

5.4. License Terms 17

5.4.1. Duration and Relinquishments 17

5.4.2. Participation 17

5.4.3. Work Obligation 17

5.4.4. Domestic Market Obligation 17

5.5. Local Content 18

6. Outlook 19

7. Appendix 20

7.1. References 20

7.2. Contact Us 21

7.3. Disclaimer 21

List of Tables

1.1. List of Tables

Table 1: Regime Overview 4

Table 2: Lebanon, Liquids Royalties (%) 7

Table 3: Lebanon, Profit Sharing Mechanism (%) 8

Table 4: Lebanon, Final Profit Sharing Terms, First Licensing Round 9

Table 5: Lebanon, Depreciation Rates (%) 9

Table 6: Lebanon, Eligibility Criteria for Pre-Qualification, Second Licensing Round 15

Table 7: Lebanon, Technical and Commercial Proposal Marking, First Licensing Round 16

Table 8: References 20

List of Figures

1.2. List of Figures

Figure 1: Regime Flow Chart 5

Figure 2: Lebanon, Indicative NPV10/boe, IRR and State Take Comparison, Regional 6

Figure 3: Lebanon, Legal Framework 12

Figure 4: Lebanon, Institutional Framework 14

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