Saudi Arabia: Lebanon First Oil And Gas Licensing Round

Last Updated: 16 February 2017
Article by Richard Devine and Alain Sfeir

Lebanon recently announced its intention to restart its first oil and gas licensing round and is soliciting bids for five offshore blocks. The announcement comes more than three years after an initial bid round was delayed due to internal political deadlock. The new bid round is seen as a significant first step for Lebanon developing of its hydrocarbons industry.

Tender Process

The government has approved two decrees which define the geographical parameters of the blocks, specify the tender process and set out a model exploration and production agreement (EPA) to be entered into with participating companies. The licensing round will allow companies to make their bids and eventually obtain an offshore exploration and production license.

Bids are invited by consortia consisting of at least three companies.  The operator must hold a participating interest of at least 35% and each non-operator must hold a participating interest of at least 10%.

The tender process will extend over a period of ten months starting in February 2017 and ending in November 2017. The process will involve a new pre-qualification round. Potential operators will need to satisfy more stringent qualification criteria than non-operators. The new pre-qualification round for submission of documents was opened on the 2nd of February 2017 and will be closed the 31st of March 2017. Results of the new pre-qualification round will be announced on the 13th of April 2017.

Companies that were pre-qualified before the licensing round stalled in 2013 will not be required to pre-qualify again, provided that they continue to meet the pre-qualification requirements. However as per Article 2 of the Decision no. 1 of the Minister of Energy and Water dated 26/01/2017, such companies should notify the Lebanese Petroleum Administration (LPA), within 15 days from the 2nd of February 2017, of any change(s) that could affect the prequalification criteria and shall provide the LPA, before 31st March 2017 inclusive, with their financial statements for the years 2014 and 2015 (audited) and 2016 (unaudited).

Companies that were pre-qualified as a Right Holder Non-operator and want to upgrade their status to become a Right Holder Operator should submit to the LPA the required documents listed in annexes 3 and 4 of the Decree no 9882/2013

Pre-qualified companies will be invited to submit their bids by 15 September 2017. We understand that bidding companies will be required to submit a bid bond of USD 5,000,000 in favour of the Ministry of Energy and Water as part of the bid process and will be expected, amongst other things, to commit to a minimum work commitment of at least one exploration well during each of the two exploration periods under the EPA. The evaluation of the bids and entry into the EPAs is expected to occur by 15 November 2017.

Considerations for International Oil Companies (IOCs)

The government plans to eventually offer 10 offshore blocks for exploration to companies, of which three can be characterised as deepwater blocks and the remaining seven as ultra-deepwater blocks. Although, like Cyprus and Israel, the Lebanese offshore blocks show promise of being particularly gas prone, geological studies suggest that the more mature source rocks of the North Levant Basin will likely be oil prone too. Estimates peg offshore reserves in Lebanon at approximately 96 trillion cubic feet of natural gas and 865 million barrels of oil.

The Lebanese Minister of Energy and Water declared on the 26th of January 2017 that blocks 1, 4, 8, 9 and 10 will be open for bidding during the first offshore licensing round as per the below:  

Source: Lebanese Petroleum Administration - http://www.lpa.gov.lb/index.php

It is expected that any gas finds resulting from the exploration activities will be utilised initially to meet domestic demand for gas. If sufficient quantities are discovered to allow Lebanon to become a net exporter of gas, a joint LNG export facility with Cyprus or Egypt might become feasible in the medium to long term, depending on, amongst other things, the size of the gas finds, gas prices, market conditions and political considerations. 

The EPAs to be entered into with IOCs will be based on a production sharing contract model where the IOCs will bear the risk of operations being unsuccessful but both the IOCs and the Lebanese government will share in the oil and gas produced from the blocks. Each participating company will be required to establish and maintain a legal presence in Lebanon for the duration of the EPA to undertake its obligations under the EPA. We understand that the government's revenues from its share of oil and gas will be deposited into a national sovereign wealth fund whose creation is currently under discussion. Plans are also underway for the government to adopt a tax regime that will apply to the hydrocarbons industry. Uncertainty over applicable taxes will make it much more difficult for oil companies to evaluate the opportunities the licensing round presents. There is also uncertainty about how the EPAs will be characterised as a matter of Lebanese law. If the EPAs are considered administrative contracts then (in theory) they may be unilaterally amended by the state for national considerations.  This is likely to be a chief concern for potential investors.

One encouraging development for investors is that the Government of Lebanon has announced its intention to join the Extractive Industries Transparency Initiative (EITI). The EITI is a voluntary initiative through which the Government of Lebanon will commit to publishing reports on how the government manages the oil, gas, and mining resources. The implementation of the EITI will promote transparency in the hydrocarbons sector and help demonstrate the benefits of the industry to the Lebanese population.

Lebanon First Oil And Gas Licensing Round

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.