It’s official! Lebanon an oil producing country

The Lebanese government awarded a consortium led by Total (France), and including ENI (Italy) and Novatek (Russia) the exploration and production contracts of two maritime blocks (4 and 9).

“The Cabinet approved the financial and technical terms agreed upon with the consortium,” said Walid Nasr, Chairman of the Lebanese Petroleum Administration (LPA).

The next step is signing the Exploration and Production Agreement (EPA). Once signed, the consortium can start actual exploration.

Under the EPA, right holders may explore for oil and gas during a five year exploration phase. It can be extended to up to ten years with the approval of the Cabinet.

If the right holders discover oil or gas, they must appraise its commercial potential. If promising, they must propose a development plan.

The development plan is subject to Cabinet approval. After it is granted, the right holders must produce oil or gas during a 25 year production phase, which can be extended by five years if the right holders agree to make additional investments.

Revenues from oil and gas are split between the right holders and the State. Right holders must pay the State four percent royalties on gas, and five to 12 percent on crude oil depending on a variety of conditions.

A portion of revenues is allocated to the right holders to reimburse costs. The balance is split between the State and the right holders which proportions increase in the favor of the State, once right holders have recovered their investment.

The right holders must give preference to local goods and services in awarding contracts, and at least 80 percent of the employees must be locals.

The Parliament ratified the oil tax law last September. It sets the corporate income tax on exploration and operating offshore drilling at 20 percent. Regular corporate income tax is normally capped at 15 percent.