Energy Library

Dec 29, 2020

In 2017 Lebanon awarded two of its offshore blocks (4 and 9) to a consortium composed from Total, ENI, and Novatek.

In the country’s first signed Exploration and Production Agreements (EPA) Royalties were Not biddable. They equal 4% of the gas produced, and a varying percentage (between 5% and 12%) of the oil produced.

• Profit split Biddable within R factor.
• The minimum share of the State starts at 30% and then rises to a maximum of 55% (Block 4) and 40% Block 9 when the R Factor (the total of all income in the project over all outgoing payments) reaches 2.5.
• Corporate Income Tax: 20%.
• Cost Recovery Limits Biddable, ceiling is 60% in Block 4 and 65% in Block 9.
• To mention unlimited carry forward losses, and stability clause are part of the contract, withholding tax on interests, taxed at a rate of 10%.

The model to the report published by the Lebanese Oil and Gas Initiative (LOGI) in mid-2020 is a static, deterministic Discounted Cash Flow model that follows the FAST methodology. The provenance of all inputs and assumptions which have been taken from primary sources. Lebanon published the two production signed agreements it signed with the consortium led by Total, so the full text has been available for fiscal interpretation. Data for project economics, such as capital and operating expenditure, is more speculative in two senses. First, there are almost no data about Lebanon’s offshore, since only one well has been drilled and no commercial discoveries developed. This means, from a modelling perspective, that the public statements of the companies have to be parsed for general indications, and projections made using generic industry approaches and projections. Read more