The Oil and Gas Law Review: Lebanon

Introduction

According to seismic studies conducted in the past two decades and based on announcements made by the ministry of energy and water (MEW), preliminary estimates indicate the presence of around 35 trillion cubic feet of gas, and 660 million barrels of liquid oil in Lebanon's offshore.2

In 2010, the first modern legislation regulating the petroleum sector, Law No. 132 on the offshore petroleum resources, was passed. Seven years later, the first offshore licensing round was launched and two exploration and production agreements (EPA) were signed subsequently covering blocks 4 and 9; drilling in block 4 began end of 2019. In April 2020, the Minister of Energy and Water (the Minister) declared, however, that no commercially viable amount of gas was found during the first well exploration. In spite of that, exploration has revealed several pockets of gas and a certain 'petroleum system', refloating by that the hope of finding commercially viable amounts in Lebanon's waters.3

It is still expected that the sector would contribute, in the coming years, to achieving self-sufficiency by meeting the needs of the local market, also ensuring the strengthening of Lebanon's trading capabilities through the export of natural gas, if discoveries of resources would allow.4

As to exporting options, Lebanon is considered strategically placed to benefit from exporting natural gas through established gas pipelines, connected to Syria, Jordan and Egypt as well as Turkey. The prospectivity of exporting liquefied natural gas using the existing plants in Lebanon or the region to supply the European and Asian markets seems also promising.5

Legal and regulatory framework

The main legal instruments governing the petroleum exploration and production in Lebanon are: (1) the Offshore Petroleum Resources Law No. 132 dated 24 August 2010 (OPRL); (2) Law No. 57 dated 5 October 2017 on the tax provisions governing petroleum activities (Petroleum Tax Law); and (3) Law No. 84 dated 10 October 2018 on strengthening the transparency in the petroleum sector (Transparency Law). In addition, subsequent decrees implement the OPRL, such as Decree No. 7968 dated 7 April 2012 establishing the Lebanese petroleum administration (the sector's regulator) (LPA), and Decree No. 10289 dated 30 April 2013 on the petroleum activities regulations (PAR). The Lebanese government has also passed several other decrees that together form the legal and regulatory framework for the petroleum sector in Lebanon.

i Domestic oil and gas legislation

The OPRL is the petroleum resources management tool in Lebanon. The OPRL regulates mainly petroleum reconnaissance, award of exploration and production including exploration and production agreement entered between the Lebanese state (the state) and the right holders, as well as the establishing of the LPA, petroleum production and transportation, entitlements and fees, decommissioning of facilities, and health and safety and environment requirements. Petroleum is defined in the OPRL as oil, or natural gas or both and all kinds of gas or other hydrocarbons existing in their natural state in the subsoil of the seabed, as well as other hydrocarbons in a liquid or gaseous state. The ownership of, and exclusive right to petroleum resources and their management belong to the state.6

Petroleum Tax Law subjects right holders' companies and operators to taxation on petroleum activities, including income tax, tax on salaries and wages, stamp duty tax, built property tax, and value added tax (VAT). Petroleum Tax Law, however, exempts equipment, machinery, tools, vehicles, spare parts and materials that do not have equivalence in the national production and that are imported by right holders' companies and operators to be used in the petroleum activities or to be re-exported, from customs duties.

Transparency Law requires a publication and disclosure duty, towards the public, on the council of ministers, MEW, the LPA, as well as ministries, public administrations and bodies directly linked to petroleum activities, regarding information related to the petroleum activities. In a move to enhance transparency and fight corruption, Transparency Law also prohibits certain persons from investing in petroleum activities such as the president of the republic, the speaker of the parliament, the premier, ministers, staff and consultants. Transparency Law enhances the mission of associations supporting transparency in the sector and grants them the right to lodge complaints and begin criminal prosecutions for offences involving bribery, corruption and influence peddling.

Decree No. 7968 establishing the LPA vests it with a financial and administrative autonomy but subjects it to the guardianship authority of the Minister. The LPA plans, supervises and manages the petroleum sector, including undertaking all necessary preparations related to licensing rounds and coordinating with companies. The LPA is composed of six administrative units: strategic planning unit, technical and engineering unit, geological and geophysical unit, legal unit, economic and financial unit, and quality health safety and environment (QHSE) unit.

PAR implements various areas covered by the OPRL. It sets forth legal, technical, and commercial regulations to conducting petroleum activities. PAR covers legal representation of the right holder, management system, general duties of the operator and the right holder, strategic environmental assessment study, reconnaissance, petroleum production and transportation, exploration and production rights, cessation of petroleum activities and decommissioning of facilities, and production entitlement and fees.

The Block Delineation Decree No. 42 dated 19 January 2017 divides the Lebanese Offshore7 and the Exclusive Economic Zone (EEZ) into 10 designated blocks with specified coordinates. Tender Protocol to Participate in Licensing Rounds Decree No. 43 issued on the same date covers all the provisions related to the administrative, financial and legal requirements for submissions to participate in the licensing rounds, as well as the process of evaluation by the LPA. A sample of the Model Exploration and Production Agreement (EPA) is annexed thereto. EPA is the contract that regulates petroleum activities. It extends to awarding the exploration, appraisal and development of petroleum from the production phases to commissioning.

ii Regulation

The council of ministers is the body responsible for enacting legislations and policies for managing petroleum resources. The Minister, in turn, is in charge of ensuring a proper implementation of the legislation and policies, supervising and monitoring industry practices to protect the state's environmental and public health interests following an opinion by the LPA, and is the body that contracts with the international oil companies. The LPA is the body responsible for the regulation and management of licenses in the EEZ, the bidding process and the pre-qualification phase. The LPA's units exercise their powers in various affairs such as strategic planning, technical and engineering, geology and geophysics, legal, economic and financial, and QHSE.

iii Treaties

The New York Arbitration Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards was ratified by Lebanon on 11 August 1998. Lebanon has also ratified the UNCLOS on 5 January 1995, and the Convention on the Settlement of Investment Disputes between states and nationals of other states (ICSID) on 26 March 2003.

On 17 January 2007, Lebanon entered into an agreement with Cyprus regarding the delimitation of their respective EEZ. Nevertheless, disputes remain ongoing with the other neighbouring countries, Israel and Syria, regarding the same issue. Thus, the agreement between Lebanon and Cyprus has not been ratified by the state.8

Additionally, Lebanon has entered into conventions for the avoidance of double taxation and the prevention of fiscal evasion on taxes from income and capital with a number of states. On a national level, the Petroleum Tax Law requires, in respect of a person resident in a country that signed a double taxation treaty with Lebanon, that the taxpayers withhold tax on the amounts due to said person.9

Licensing

The OPRL vests the exclusive ownership of petroleum resources and management with the state, and requires an authorisation for persons wishing to conduct petroleum activities in accordance with the law, while reserving the right of the state to participate in or carry out similar activities.10 Article 7 OPRL stipulates that prior to granting the exclusive petroleum rights or allowing petroleum activities, and subject to the approval of the council of ministers, the Minister shall undertake the necessary preparations for the announcement of a petroleum licensing round. This licensing round would be announced based on a study carried out by the LPA and would include a strategic environmental assessment study conducted by the state prior to any granting of rights.

Prior to the exploration and production, and in accordance with Article 11 OPRL, the Minister may grant a reconnaissance licence, for a period up to three years. The reconnaissance licence must not be exclusive and does not confer upon the right holder any preference or privilege with respect to obtaining any other petroleum right. All data resulting from the reconnaissance licence remains the property of the state. A licence is issued for the applicant wishing to conduct geological surveys and data collection regarding petroleum activities or exploration, including sampling to a maximum depth of 50 meters below seabed.11 A reconnaissance licence may be limited to specific types of reconnaissance activities. The licence includes the following key terms without limitation: (1) duration of the license; (2) management of operations conducted pursuant to the licence; (3) insurance to be established in relation to the activities performed pursuant to the license; and (4) implementation and timing of specific activities. Data resulting from the reconnaissance operations remain the property of the Lebanese state. PAR requires that reconnaissance operations are conducted in a prudent manner and according to applicable laws. The Minister may, upon recommendation by the LPA, extend the licence by a period of up to one year, not to exceed a total period of three years. The applicant must include a justification for the extension.

Article 12 OPRL provides that the council of ministers may, on the basis of a proposal of the Minister based on LPA's recommendation, grant an exclusive licence for the purpose of undertaking petroleum activities in accordance with an EPA that includes two phases: (1) an exploration phase not exceeding 10 years; and (2) a production phase not exceeding 30 years. Article 13 OPRL notes that the Minister is responsible for launching invitations to participate in the licensing round that should be submitted to the LPA. After the closing date for submissions, the LPA evaluates and proposes a short list of applicants to the Minister,12 who would then negotiate with them based on the conditions and requirements set forth in the law. The minister would then submit a report to the council of ministers with the results of negotiations and the selected applications to become right holders and a recommendation for signing an EPA. Upon approval of the council of ministers, each of the selected applicants becomes the holder of an exclusive petroleum right to carry out petroleum activities and the right holders together13 would form an unincorporated joint venture that signs the EPA, and one among them would be the operator.14 The EPA would contain the following key terms, without limitation: (1) the coordinates of the awarded area; (2) the allocation of participation interest between right holders; (3) the duration of the EPA; (4) potential state participation; and (5) standard minimum guarantees covering the minimum work obligations. The exploration phase, if shorter than 10 years, may be extended by the council of ministers within the ten-year limit. The same applies to the production phase than can be extended within the 30-year limit. As per Article 25 OPRL, 'a right holder may only surrender a petroleum right pursuant to the EPA provided the minimum work commitment has been fulfilled or the minimum expenditures, as well as financial obligations due to the state, including taxes have been paid'.

EPAs are only awarded to pre-qualified applicants.15 The pre-qualification requirements of companies to participate in petroleum activities licensing rounds (including legal, financial, technical requirements as well as quality, health, safety and environmental requirements) are stipulated for under Decree No. 4918 dated 6 June 2019 (tender protocol related to the second licensing round). Practically, the pre-qualification criteria that Lebanon selected is in favour of large oil companies, seeing that Lebanon's resources are found in deep water and those large companies would have the expertise and capital required to exploit them.16

Article 46 PAR deals with production permits. Production of petroleum, except petroleum from an experimental production, may not be carried out unless a permit is awarded by the Minister, based on the opinion of the LPA.

Other licences may be granted, such as the facility licence. According to Article 31 OPRL, if the approved plan for development and production17 contains plans for construction, placement and operation of transportation or storage facilities, the right holders can submit a plan in this regard, and the council of ministers shall award a specific petroleum licence for the construction, placement and operation of transportation or storage facilities. The council of ministers may, on the basis of a proposal by the Minister and the LPA, stipulate the conditions for awarding this facility licence with regards to the ownership of the facility, its placement including route, destination and landing point for pipelines or cables, its capacity, tariffs, etc.

Production restrictions

As to production entitlements, according to Article 35(2) OPRL, the Minister grants a permit of production to the right holder, upon his or her application, for fixed periods of time, and in which the quantity of petroleum allowed to be produced is set. Moreover, Article 42 thereof notes that the production of petroleum extracted from a reservoir in an area covered by an EPA shall be divided into royalties paid to the state, and cost petroleum18 and profit petroleum.19 Each right holder would be required to pay royalties to the state and would be entitled to receive his or her part from the cost petroleum and profit petroleum corresponding to his or her participating interest share in the EPA, noting that the calculation and allocation of entitlements is decreed by the council of ministers, on the proposal of the Minister based on the opinion of the LPA20.

On the other hand, the applicable laws do not restrict the exportation of production per se but subject it to the approval of the LPA. In fact, the same is inferred from Article 16(3) Petroleum Tax Law that exempts from VAT the activity of transporting petroleum products outside the Lebanese territories and maritime waters, provided that the LPA has approved this exporting activity. This rule is also inferred from Article 50 PAR, which requires the right holders to include in their reports of production (submitted daily to the LPA as of commencement), inter alia, the volume of export per facility. There are no requirements under applicable laws for the sale of the production into the local market, noting that the state benefits from the right to collect royalties in kind, instead of cash, subject to certain conditions.21

As to price setting, Articles 80 and 81 PAR set the norm for the valuation of crude oil and petroleum for reference. In fact, Article 80 requires that the value for each type of crude oil is set separately with respect to the recipient (i.e., whether it was sold to non-affiliated companies, to a third party on terms other than FOB, or to an affiliated company). In the latter case, the price is agreed between the Minister upon the recommendation by the LPA or the entity that holds a participation interest on behalf of the state, and the right holder subject to certain criteria. Article 81, on the other hand, sets the valuation terms of the petroleum other than crude oil extracted from reservoirs within the EPA area also with respect to the recipient.

Assignments of interests

Assignments by way of sale or transfer of interests in petroleum extracted from a reservoir in an EPA area shall be made in accordance with the terms and conditions and procedure adopted in the global market between independent parties.22 The assignment of interests is not subject to any form of state approval per se, but rather it is only incumbent upon the concerned parties to inform the Minister as well as the LPA prior to any such assignment of interest in the petroleum or volumes to be delivered in accordance with Article 40(2) OPRL. Regulations for sale of or the transfer of interest in petroleum are decreed by the council of ministers, which is also in charge of resolving any conflict arising out of assignments of interests on the basis of a proposal by the Minister based upon the opinion of the LPA.

Petroleum rights could also be assigned in accordance with Article 70 OPRL. However, prior approval of the state is required. In fact, rights and obligations obtained through a petroleum right in whole or in part can only be transferred to a company qualified according to OPRL, and only after obtaining the approval of the council of ministers granted on the basis of a proposal by the Minister based upon the opinion of the LPA. Article 70(2) also notes that the same requirements shall apply to any direct assignment of any right in a company holding a petroleum right, including, inter alia, assignment of shareholdings and other ownership of shares that may provide decisive control of a person possessing a participating interest in the petroleum right. The prior approval of the state is also engaged with regard to the transfer of ownership or right of use of a facility upon which a petroleum activity is dependent; this approval is granted on the basis of a proposal by the Minister based upon the opinion of the LPA.

Petroleum right holders and operators are also under requirement to inform the tax administration about any direct or indirect, partial or full transfer of their shares or other rights within one month from its date of occurrence, in accordance with Article 9(5) Petroleum Tax Law.

Tax

According to Article 45 OPRL, 'petroleum activities and petroleum rights pursuant to this law which are conducted in Lebanon and its waters shall be subject to Lebanese tax as stipulated by applicable taxation laws'.

The Petroleum Tax Law requires taxpayers to comply with certain conditions for the purpose of calculating the taxable result, including compelling right holders and operators to adopt the 'ring fencing' principle in accordance with the EPA, and adopt an accounting based on full cost.23 It also requires a separation and allocation of costs in accordance with the purpose for which these costs are incurred where all exploration and development costs are considered as capital expenditures and operating costs are considered as operational expenditures, and general and administrative expenses are regularly allocated to exploration costs, development costs and operating costs. The Petroleum Tax Law also requires taxpayers to adopt the accrual basis of accounting in recording the accounting entries provided that this principle is also applied to other taxpayers being contractors, subcontractors and operators other than the right holders.

Right holders and operators are subject to a tax rate of 20 per cent on income,24 and to the provisions of the third chapter of Income Tax Law (tax on income from movable capital).25 The Petroleum Tax Law also imposes a tax on salaries and wages on employees' salaries, wages, indemnity benefits, public and private pensions and lifetime benefits received by persons employed by individuals working in the petroleum industry or their providers of services and materials, within the Lebanese territory and waters.26 Petroleum Tax Law also imposes a proportionate stamp duty27 fee on all agreements signed by the right holders and operators.

Taxpayers are exempt from the built property tax on constructions, installations and fixations used to perform petroleum activities. As to VAT, taxpayers are subject to the standard rate of 11 per cent, provided, as noted in an earlier paragraph, that the activity of transporting petroleum products outside the Lebanese territories and maritime waters is exempt from VAT. Article 16(6) of the Petroleum Tax Law also exempts all goods that are exempted from custom duties, and imported by the right holders, operators or their agents for the use in petroleum activities.

Transactions between right holders and operators related directly to the EPA and that only cover the distribution of expenditures are not subject to VAT and do not require the issuance of invoices to support them.28

The Petroleum Tax Law exempts from customs duties, including the minimum duty and the internal consumption duty, 'equipment, machinery, tools, vehicles, spare parts and materials, that do not have equivalence in the national production and that are imported by each right holder or operator or their agent to be used in the petroleum activities or to be re-exported'. It also exempts from customs duties, import of household appliances, clothing and personal effects held for personal use by the foreign employees working for the right holder or operator in Lebanon, or by their families.

Environmental impact and decommissioning

Petroleum activities are subject to local laws relating to the protection of the environment, mainly Law No. 444 dated 29 July 2002, to the extent that such activities are conducted in the territorial waters.29 The OPRL, for example, vests within the Minister the responsibility of taking necessary measures to protect the waters, health, properties and environment from pollution in states of emergency.30 Basically, it is expected from operators and right holders, not only to comply with applicable environment laws, but also to conduct petroleum activities in a responsible and prudent manner that includes practices and methods reasonably expected from internationally experienced operators that take due account, inter alia, of the protection of the environment.31

First, Articles 7 OPRL and 11 PAR require the state to conduct a strategic environmental assessment study prior to awarding petroleum rights or to licensing petroleum activities. Moreover, the operators and right holders are required to submit an environmental impact assessment study32 along with their plan for development and production,33 or plan for cessation of petroleum activities.34 Generally, Article 32 OPRL requires the operator to submit to the Minister, on behalf of the right holder, a detailed environmental impact assessment based on an approved programme, as part of any plan whether for development, production, transportation, storage or usage. We note that a permit must also be obtained from the Minister, in coordination with the minister of environment, before any flaring or cold ventilation to the extracted components.35 OPRL also requires the right holder to restitute the environment to the condition it was in prior to any accident, in the context of emergency preparedness requirement.36

The ministry of environment, in coordination with the Minister, is in charge of supervising and controlling environmental matters related to petroleum activities and shall coordinate with other concerned authorities, take initiatives or measures deemed necessary to minimise negative impact that petroleum activities may have on local communities and the environment.37

Lastly, Article 141 PAR sets forth a list of requirements that the right holder must comply with in conducting petroleum activities, including employing up-to-date techniques, practices and methods of operation for the prevention of environmental damage, the control of waste and the avoidance of unnecessary loss of, or damage to, natural resources.

As to decommissioning, it is governed by Articles 46 et seq. OPRL and 59 et seq. PAR. The right holders are under the duty to notify the Minister without delay of the time of the expected permanent cessation of operation in a facility. A plan for the cessation of petroleum activities and decommissioning of one facility or more is also required to be submitted at the earliest three years prior to, and not later than one year prior to the date of expiry of an EPA or licence or the planned surrender of the right or termination of the use of a facility. And in case the petroleum right is revoked, a plan for cessation of petroleum activities and decommissioning shall be prepared and submitted as soon as practically possible.

Moreover, the plan must ensure that cessation and decommissioning is conducted in a manner which, when applied, would comply with standards and procedures generally recognised as prudent in the international petroleum industry as well as the right holders' standards for cessation and decommissioning.38

The strict liability of the right holder and the owner of a facility, jointly and severally, is engaged for any direct loss or damage resulting from implementing an approved plan for the cessation of petroleum activities or decommissioning of facilities. Also, in case of facility abandonment, the right holder and the owner of the facility are jointly and severally liable for any damage or inconvenience caused wilfully or inadvertently in connection thereto. This liability may be taken over by the state, upon agreement between the concerned parties and the state, but subject to an agreed financial compensation to the latter.39

Foreign investment considerations

i Establishment

In accordance with Articles 7 and 8 PAR, the applicant to a petroleum right must have an appointed legal representative residing in Lebanon or such other place as approved by the Minister after consulting the LPA. Moreover, a petroleum right may only be awarded to a legal entity incorporated, registered and headquartered in a jurisdiction fully transparent to Lebanese authorities. The same applies to an affiliated company of the right holder awarded an exclusive petroleum right. As to foreign right holders, they are required to establish and maintain a legal presence in Lebanon for the purpose of fulfilling their obligations pursuant to applicable laws. If the foreign legal entity is awarded an exclusive right, it is at least required to establish and maintain a branch in Lebanon. If the award is not made exclusively, the right holder is required to at least establish and maintain a legal presence in Lebanon for the purpose of taxation. As to location, the petroleum activities are supposed to be conducted from Lebanon, except for certain exceptional cases subject to the approval of the Minister. The legal presence must be: (1) appropriately staffed and authorised to manage all aspects of rights and obligations pursuant to applicable laws; and (2) initiated within no later than 30 days after the entry into force of an EPA or other licence granting an exclusive petroleum right.

As to the procedure of establishing a branch of a foreign entity, it requires the filing of an application for registration to the ministry of economy and trade attaching to it certain documents pertaining to the parent company. Following approval of the ministry, the latter would issue an 'acknowledgment of registration' of the branch in Lebanon. Registration process would take around seven to ten banking days running from the date of submission of the certified documentation to the competent authorities. The branch must also be registered before the trade registry, and within two months from completion of above process, a 'notice of commencement of business activity' of the branch must be issued by the ministry of finance.

The establishment of a local entity would require less time (i.e., around two to three banking days running from the date of execution of the relevant corporate documentation).

ii Capital, labour and content restrictions

It is no secret that Lebanon has been facing a severe financial and banking crisis since end of 2019. Since then, banks have imposed capital control measures, including severe restrictions on withdrawals and international transfers, unless in exceptional cases where transfers or withdrawals are motivated by certain elements of urgency. Such capital control measures, however, are still not codified. In fact, there have been attempts to regulate these restrictions but in view of the disagreement between the authorities over the issue, these attempts have failed. As to foreign exchange in the industry, Article 160 PAR notes that the daily average of the central bank of Lebanon's daily currency exchange rates for sales and purchases shall be used when converting prices, deductibles, costs and expenses invoiced in a foreign currency.

When it comes to exploiting local human resources, Article 57 OPRL and parallel Articles 155 and 157 PAR set forth the rules. In fact, a right holder (and subcontractors) is required to prioritise Lebanese persons in awarding contracts for the construction of a facility, and to give preferential treatment to the procurement of material, goods and services related to petroleum activities when terms and conditions offered by Lebanese suppliers (that are subject to public tender) are equal to their competitors'. Moreover, the right holder (and subcontractors) must employ qualified personnel of Lebanese nationality whenever available, as well as organise and fund the training of Lebanese personnel associated with petroleum activities, to facilitate their employment at all levels of the management.

iii Anti-corruption

Article 162 PAR regulates the prevention of corruption in the petroleum industry. In fact, it requires any physical or legal person engaging in petroleum activities to cooperate with the state on preventing corruption, as well as to take immediate administrative disciplinary actions and rapid legal measures to prevent, investigate and prosecute in accordance with applicable laws, any person suspected of corruption or other deliberate or grossly negligent misuse of resources. Moreover, it is strictly forbidden to receive or offer any offer, payment or benefit of any kind, directly or indirectly, as an inducement or reward for any rights granted by the State under the OPRL or for acting or making any decision, abstaining from any action or abstaining from making a decision in relation to petroleum activities.

On another note, the Transparency Law was enacted in 2018 with the aim of enhancing and strengthening transparency in the sector. The Transparency Law subjects prominent positions to accountability, such as without limitation, any person holding a public authority, any person appointed or elected for the performance of a public service, with or without allowance, and the right holders non-operators and the right holders operators as defined in OPRL, the contractors, the subcontractors and the operating companies not considered as right holders. It also imposes a double requirement, of publication and disclosure, of information related to petroleum activities. Most importantly, the Transparency Law prohibits certain persons from investing in petroleum activities in a bid to fight corruption. Also, the Transparency Law allows any aggrieved party and any association supporting transparency to lodge complaints and begin criminal prosecutions for offences involving bribery, corruption and influence-peddling, while pursuing a private prosecution before the competent judicial authorities.

Current developments

In early 2018, exclusive petroleum rights were granted to a consortium of right holders including Total SA, Eni SpA and Novatek PJSC as a result of a first offshore licensing round covering blocks 4 and 9,40 and drilling of Lebanon's first well started officially on 27 February 2020.41 On 4 April 2019, a second offshore licensing round was announced for blocks 1, 2, 5, 8 and 10. The deadline for applications has been extended several times in the light of the current situation and the implications of the covid-19 pandemic, noting that the Minister has issued a memorandum in which he clarifies that MEW's aim is to conclude the licensing round before the end of 2021.

In 2019, the Minister announced that Lebanon will enter into a cooperation agreement for the exploration of oil and gas with Cyprus. Talks are still ongoing.

With regard to the outlook concerning the legislative framework, it is expected that additional important laws will be enacted in the near future. These draft laws cover the establishment of a 'petroleum asset management department', as well as regulating a sovereign wealth fund, and the onshore exploration.42 These laws would help enhance confidence in the Lebanese petroleum sector and establish stronger grounds for operation.43

Footnotes

1 Jean Baroudi is the managing partner and Nadine Allam is an associate at Baroudi & Associates.

2 Dr May Ali Hammoud and Dr Hussein Ahmed el Ezzi, Lebanon's petroleum in maritime waters, contracts and regulations (1st edn, Sader, 2019) p. 13.

3 Timour Azhari, 'Lebanon's first offshore gas drill is a huge disappointment', 27 April 2020, www.aljazeera.com/ajimpact/lebanon-offshore-gas-drill-huge-disappointment-200427182315344.html, accessed 31 August 2020.

4 See footnote 2, p. 14.

5 Lebanese Petroleum Administration, 'Lebanon's oil and gas sector', www.lpa.gov.lb/Library/Assets//Gallery/asdasdas/Brochures/Lebanon's%20oil%20and%20gas%20sector.pdf, accessed 31 August 2020.

6 OPRL 2010, Section 4.

7 The maritime zones of the Republic of Lebanon were delineated and declared by virtue of Law No. 163 dated 25 August 2011 in accordance with the provisions of United Nations Convention on the Law of the Sea (UNCLOS).

8 United Nations Development Programme, 'The maritime boundaries and natural resources of the republic of Lebanon, challenges and opportunities', www.undp.org/content/dam/lebanon/docs/Governance/Publications/Legal%20section%201-6.pdf, accessed 3 September 2020.

9 Petroleum Tax Law 2017, Section 10(2).

10 OPRL 2010, Sections 4–6.

11 PAR 2013, Section 16.

12 OPRL 2010, Section 17.

13 Article 1 OPRL requires that the EPA is entered into between the state and at least three right holders, among whom one acts as the operator.

14 OPRL 2010, Section 20.

15 OPRL 2010, Section 15.

16 Carole Nakhle, 'Lebanon's upstream oil & gas legislative, regulatory, and fiscal framework: regional comparison', 2016, www.lcps-lebanon.org/publication.php?id=284, accessed 10 August 2020.

17 Article 28 OPRL: 'When a discovery is made, the operator shall, within six months of the discovery, perform tests necessary to appraise the potential commerciality of the reservoir and notify the minister [of energy and water] of the results. If the right holder in accordance with requirements of applicable law and the provisions of the EPA decides to develop one reservoir or more, the operator on behalf of the right holders shall submit a plan for development and production to the minister.'

18 Cost petroleum is defined in Article 1 OPRL as follows: 'the portion of petroleum extracted from a reservoir and available to each right holder to cover the cost and expenses incurred in carrying out petroleum activities as stipulated by applicable laws and specified in each individual EPA'.

19 Profit petroleum is defined in Article 1 OPRL as follows: 'the portion of petroleum extracted from a reservoir in excess of cost petroleum which is available and allocated to each right holder and the State as stipulated by applicable laws and specified in each individual EPA'.

20 OPRL 2010, Section 44.

21 id., Section 43(2).

22 id., Section 40.

23 Petroleum Tax Law 2017, Section 3.

24 Petroleum Tax Law 2017, Section 7.

25 id., Section 9(9).

26 id., Section 11.

27 Fixed at 0.4 per cent of the amounts included in the agreement.

28 Petroleum Tax Law 2017, Section 16(7).

29 id., Section 60(1).

30 id., Section 9.

31 id., Section 61.

32 In accordance with Decree No. 8213 dated 24 May 2012 'strategic environmental assessment for policies, plans and programmes of the public sector', as per Articles 11–12 PAR.

33 OPRL 2010, Section 29 and PAR 2013, Section 41 et seq. that require that the study is made in accordance with Decree No. 8633 dated 7 August 2012 Environmental Impact Assessment Rules. The same applies on transportation and storage (PAR 2013, Section 55).

34 OPRL 2010, Section 47(3).

35 id., Section 36(1).

36 id., Section 56(2).

37 id., Section 60(2).

38 PAR 2013, Section 59.

39 id, Section 67.

40 Dana Khraiche, 'Total, Eni, Novatek Win Lebanon's First Offshore Licenses', www.bloomberg.com/news/articles/2017-12-14/total-eni-novatek-win-lebanon-s-first-offshore-energy-licenses, accessed 26 August 2020.

41 Diana Kaissy, LOGI, 'Long road ahead as Lebanon begins exploratory drilling for offshore oil and gas', https://logi-lebanon.org/KeyIssue/Long-road-ahead-as-Lebanon-begins-exploratory-
drilling-for-offshore-oil-and-gas, accessed 26 August 2020.

42 Talal F. Salman, 'The Petroleum Legislative Framework for Lebanon', www.arabdevelopmentportal.com/blog/petroleum-legislative-framework-lebanon, accessed 26 August 2020.

43 ibid.

Get unlimited access to all The Law Reviews content