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).
Although there are some missing elements from the country’s proposed regulatory framework for the sector, these items are unlikely to significantly affect the current offshore activities.
Lebanon has to complete its petroleum framework by at least passing a law concerning onshore petroleum resources. Lebanon aims to pass a law concerning the creation of an SWF to manage revenues from natural reserves.
Potential policy risks for the sector may arise in the future if oil or gas discoveries are made. Currently, Lebanon, which has one of the world’s highest debt-to-GDP ratio, does not have any domestic market obligation (DMO) for oil while the state has a simple priority right to purchase natural gas from the licensee at international prices.
In future, the government might be forced to introduce a real DMO for the oil and gas sector at below-market prices, which could have an impact on licensees’ business profitability.
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 is currently organising its second offshore licencing round offering Blocks 1, 5, 8, and 10 of its exclusive economic zone. The tentative schedule for the licencing round will span through 2019 with the award of the blocks in December 2019.
Lebanon is expected to also begin to look to licence onshore acreage. Although the Lebanese Petroleum Administration has already performed studies on subsurface work carried out on the onshore areas, the country still has to pass a law regulating onshore petroleum resources.