Doubts
have been raised and criticisms continue to be made about Lebanon’s choice of
upstream petroleum fiscal terms and strategies to award oil and gas licenses.
This is not surprising given the fact that it is a completely new experience
for Lebanon, a country often stuck in stalemates stemming from political
disagreements.

Despite
this, there are some internationally recognized guiding principles that
Lebanese policymakers can follow. In terms of the allocation strategy, Lebanon
selected competitive bidding, which is a positive step since this method is
increasingly popular and supported by the international community.

The
key concern in Lebanon, however, is the choice of biddable parameters, which
should be reviewed further. In terms of block delineation, Lebanon’s offshore
block sizes do not fall outside the reasonable range, especially when the
exploration risk and the relinquishment rule are taken into consideration.

With
respect to petroleum regulations, Lebanon seems to offer a middle ground
between Cyprus and Israel. Some question whether the choice of petroleum fiscal
regime Lebanon made is the correct one. In reality, the type of regime is less
relevant. Fiscal regimes can be made equivalent in terms of both control and
overall economic impact, for given oil and gas prices.

The
design of the regime, the interactions of different fiscal and quasi-fiscal
instruments, the details related to the imposition of different instruments,
among others, are by far more important. The government should not focus on a
specific instrument and instead take into account the net impact on the fiscal
regime and the investment climate.

For
more find the full report in the here document.